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athenahealth (ATHN) Q2 Earnings Miss Estimates, Stock Down
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Shares of athenahealth Inc plunged 12.2% to close at $124.92 on Jul 22, following its second-quarter 2016 results.
The company reported adjusted earnings of 34 cents per share, up 6.3% from the year-ago quarter. However, including stock-based compensation expense and amortization of capitalized stock-based compensation, athenahealth reported earnings of 6 cents per share, which missed the Zacks Consensus Estimate of 16 cents.
athenahealth posted revenues of $261.9 million, which missed the Zacks Consensus Estimate of $273 million, but increased 16.6% on a year-over-year basis.
Segment Details
athenahealth reported Business and Services revenues of $254 million, up 18% from the year-ago quarter. However, implementation and other segment posted revenues of $7.8 million, down 15.5% from the same quarter last year.
A strong client base has been a major growth driver for the company. Applications like athenaClinicals, athenaClinicals-Streamlined, athenaInsight, athenaCommunicator, athenaOne, athenaCollector for Hospital and Health Systems and the newly launched brand promise of ‘Unbreak Healthcare’ are fortifying the company’s market position in terms of exclusiveness of services provided in the respective markets.
athenahealth has also posted a stellar performance in the under 50-bed market. Solid in-patient client network has been set up by the company with hospitals like Mount Grant General Hospital and Faith Community Hospital.
Physician Details
Strong growth was driven by athenahealth’s huge client base and solid network growth. Notably, the company registered 1,528 new active physicians in athenaCollector, 1,180 physicians in athenaClinicals and 1,489 physicians in athenaCommunicator in the quarter, compared with 2,114 physicians in athenaCollector, 1,127 physicians in athenaClinicals and 1,670 physicians in athenaCommunicator in the same quarter last year.
Margin Details
Adjusted gross margin contracted 50 basis points (bps) to 61.1% in the quarter.
Operating expenses, as a percentage of revenues, decreased 50 bps. The decline was primarily attributed to lower general & administrative (G&A) and research and development (R&D) expenses, which declined a respective 30 bps and 180 bps.
However, operating margin declined 20 bps on a year-over-year basis to 1.7%.
Notably, the expenses on sales and marketing and depreciation and amortization, as a percentage of revenues, surged 90 bps and 110 bps, respectively. We believe that this increase is responsible for the operating margin decline at athenahealth.
Guidance
For 2016, athenahealth maintains total revenue projection at the range of $1.085–$1.115 billion. Adjusted earnings are projected in the $1.65–$1.85 per share band.
The non-GAAP adjusted operating income is expected between $120 million and $135 million while adjusted gross margin is projected in the band of 63.5%--64.5%.
Zacks Rank and Key Picks
Currently, athenahealth carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the medical space are Foundation Medicine Inc , Omnicell Inc (OMCL - Free Report) and Quality Systems Inc. . Foundation Medicine and Omnicell sport a Zacks Rank #1 (Strong Buy) while Quality Systems holds a Zacks Rank #2 (Buy).
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athenahealth (ATHN) Q2 Earnings Miss Estimates, Stock Down
Shares of athenahealth Inc plunged 12.2% to close at $124.92 on Jul 22, following its second-quarter 2016 results.
The company reported adjusted earnings of 34 cents per share, up 6.3% from the year-ago quarter. However, including stock-based compensation expense and amortization of capitalized stock-based compensation, athenahealth reported earnings of 6 cents per share, which missed the Zacks Consensus Estimate of 16 cents.
athenahealth posted revenues of $261.9 million, which missed the Zacks Consensus Estimate of $273 million, but increased 16.6% on a year-over-year basis.
Segment Details
athenahealth reported Business and Services revenues of $254 million, up 18% from the year-ago quarter. However, implementation and other segment posted revenues of $7.8 million, down 15.5% from the same quarter last year.
ATHENAHEALTH IN Price, Consensus and EPS Surprise
ATHENAHEALTH IN Price, Consensus and EPS Surprise | ATHENAHEALTH IN Quote
A strong client base has been a major growth driver for the company. Applications like athenaClinicals, athenaClinicals-Streamlined, athenaInsight, athenaCommunicator, athenaOne, athenaCollector for Hospital and Health Systems and the newly launched brand promise of ‘Unbreak Healthcare’ are fortifying the company’s market position in terms of exclusiveness of services provided in the respective markets.
athenahealth has also posted a stellar performance in the under 50-bed market. Solid in-patient client network has been set up by the company with hospitals like Mount Grant General Hospital and Faith Community Hospital.
Physician Details
Strong growth was driven by athenahealth’s huge client base and solid network growth. Notably, the company registered 1,528 new active physicians in athenaCollector, 1,180 physicians in athenaClinicals and 1,489 physicians in athenaCommunicator in the quarter, compared with 2,114 physicians in athenaCollector, 1,127 physicians in athenaClinicals and 1,670 physicians in athenaCommunicator in the same quarter last year.
Margin Details
Adjusted gross margin contracted 50 basis points (bps) to 61.1% in the quarter.
Operating expenses, as a percentage of revenues, decreased 50 bps. The decline was primarily attributed to lower general & administrative (G&A) and research and development (R&D) expenses, which declined a respective 30 bps and 180 bps.
However, operating margin declined 20 bps on a year-over-year basis to 1.7%.
Notably, the expenses on sales and marketing and depreciation and amortization, as a percentage of revenues, surged 90 bps and 110 bps, respectively. We believe that this increase is responsible for the operating margin decline at athenahealth.
Guidance
For 2016, athenahealth maintains total revenue projection at the range of $1.085–$1.115 billion. Adjusted earnings are projected in the $1.65–$1.85 per share band.
The non-GAAP adjusted operating income is expected between $120 million and $135 million while adjusted gross margin is projected in the band of 63.5%--64.5%.
Zacks Rank and Key Picks
Currently, athenahealth carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the medical space are Foundation Medicine Inc , Omnicell Inc (OMCL - Free Report) and Quality Systems Inc. . Foundation Medicine and Omnicell sport a Zacks Rank #1 (Strong Buy) while Quality Systems holds a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>