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Analyst Blog

On May 9, we reiterated Athenahealth, Inc. (ATHN - Analyst Report) at Neutral based on its first quarter 2013 earnings results and guidance for 2013.

On May 2, Athenahealth announced results for the reported quarter. Its earnings per share of 16 cents beat the Zacks Consensus Estimate of 12 cents per share. Revenues climbed 30% year over year to $125.6 million in the quarter beating the Zacks Consensus Estimate of $122 million. Excluding revenue of $5.5 million from the acquisition of Epocrates, sales were $120.1 million, up 24% year over year. The company posted collections of $2.6 billion in the first quarter, up 23.8%.

Utilization of athenaCollector by medical providers and physicians grew 20.7% and 19.7% respectively, year-over-year in the first quarter. Furthermore, the use of athenaClinicals by medical providers and physicians jumped 64% and 64.6% respectively, year over year. The utilization of athenaCommunicator increased almost two and a half times to 16,296 medical providers (of whom 11,840 were physicians) from 6,800 medical providers (of whom 4,820 were physicians) in the year-ago period.  

Athenahealth updated its guidance for 2013. Total sales are expected in the range of $580 million to $615 million (earlier $525 million to $550 million). The band for Epocrates sales is $46 million to $55 million while the Arsenal property is expected to contribute $10 million of revenues by way of tenancy. The company forecasts adjusted gross margin of 63% to 64% (earlier 62% to 63%) and adjusted operating income of $68 million to $80 million (earlier $75 million to $82 million). Athenahealth guided to adjusted earnings per share of $1.05 to $1.15 (earlier $1.15 to $1.25).

The Zacks Consensus Estimate for 2013 has dropped (over the last 30 days) by 40.8% to 42 cents. The Zacks Consensus Estimate for 2014 has dropped 20.4% to 82 cents during the same timeframe.

Though fresh opportunities in health care information technology may be shrinking, the replacement market has been growing. Competition is fierce and larger competitors may benefit from the incumbency factor. Industry stalwarts such as Cerner Corporation (CERN - Analyst Report) offer long-standing seamless products which integrate inpatient and ambulatory-care systems. Allscripts Healthcare Solutions, Inc. (MDRX - Analyst Report) is another competitor in a crowded field.

We currently have a Zacks Rank #3 (Hold) on the company. However, we are more positive about other stocks such as Merge Healthcare Incorporated (MRGE - Analyst Report) which carries a Zacks Rank #2 (Buy) and is expected to do well.

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