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Analyst Blog

On Sep 10, we maintained our Neutral recommendation on athenahealth Inc. (ATHN - Free Report) . We are encouraged by the company’s robust utilization trends and rapid strides in capturing the Electronic Health Record (EHR) business of physician practices. However, we are disappointed with its 2013-second quarter results, which missed the Zacks Consensus Estimate on both earnings and revenues fronts.

Why Maintained?

On Jul 18, athenahealth Inc. reported second-quarter 2013 adjusted loss per share of 21 cents in stark contrast to the Zacks Consensus Estimate of earnings of 8 cents and the year-ago earnings of 13 cents. Reported net loss in the quarter was $12.4 million or 34 cents per share compared with the net income of $4.2 million or 12 cents.

Revenues climbed 41% year over year to $146.3 million in the quarter, led by expanded clientele for the company’s offerings and benefits from Epocrates takeover. However, revenues missed the Zacks Consensus Estimate of $148 million

Following the release of second quarter results, the Zacks Consensus Estimate for 2013 went down by a penny or 3% to 33 cents per share. The Zacks Consensus Estimate for 2014 also went down by a couple of cents or 3% to 67 cents. With the Zacks Consensus Estimates for both 2012 and 2013 remaining almost flat, the company now has a Zacks #3 Rank (Hold).

athenahealth’s unique business model makes it a strong niche provider of RCM services (athenaCollector) to small physician practices. Its SaaS-based approach allows for a lower cost and more flexible delivery mechanism that is expected to help ATHN win deals. Further, its EHR product (athenaClinical) is a key player in ambulatory or physician billing.

However, athenahealth’s long-term goal of 30% top-line growth is challenging, given the consolidation trend among small physician practices. Moreover, the company faces strong competition from EHR products of Allscripts Healthcare Solutions (MDRX - Free Report) and Cerner Corporation (CERN - Free Report) .

Other Stocks to Look For

Other stocks that are currently performing well in the same industry where ATHN operates include Medidata Solutions (MDSO - Free Report) with a Zacks Rank #2 (Buy).


In-Depth Zacks Research for the Tickers Above

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CERNER CORP (CERN) - free report >>

ATHENAHEALTH IN (ATHN) - free report >>

ALLSCRIPTS HLTH (MDRX) - free report >>

MEDIDATA SOLUTN (MDSO) - free report >>