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Why is athenahealth (ATHN) Up 7.3% Since Its Last Earnings Report?

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A month has gone by since the last earnings report for athenahealth, Inc. (ATHN - Free Report) . Shares have added about 7.3% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is ATHN due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Recent Earnings

Maintaining its streak of positive earnings surprises, athenahealth reported adjusted earnings of $1.25 per share in the first quarter of 2018, which beat the Zacks Consensus Estimate by 71.2%. Notably, adjusted earnings reported in the year-ago quarter were 32 cents.

The Watertown, MA-based maker of billing and medical practice management software posted revenues of $329.4 million, beating the Zacks Consensus Estimate of $319 million. Revenues increased 12% year over year.

Q1 Details

Segment Details

Revenues in the Business and Services were $313.3 million, up 12.6% from the year-ago quarter.

However, revenues in the Implementation and other segment were $7 million, down 1.4% year over year.

Network Expansion

Per management, the company expanded its network across ambulatory, hospital and population health platforms. Recently, athenahealth surpassed the 100-million patient threshold and currently serves more than 100,000 healthcare providers. During the first quarter of 2018, athenahealth added eight new hospitals. The company ended the quarter with 70 hospitals in its network.

The company’s network has 114,265 Collector Providers, 62,631 Clinical Providers and 71,972 Communicator Providers, up 15%, 20% and 20%, respectively, on a year-over-year basis.

In the athenaOne (Hospital) platform, number of discharged beds increased a whopping 194% year over year.

In the Population Health platform, number of covered lives increased 21% year over year.

Buoyed by stellar network expansion, the company is expected to fortify its foothold in the Revenue Cycle Management (RCM) space and drive revenues and earnings over the long haul.

Margin Analysis

A strong client base has been a major growth driver for the company. Adjusted gross margin in the first quarter was 53%, compared with 51.5% in the year-ago quarter.

athenahealth’s operating income increased 146% year over year to $54 million, driven by top-line growth and cost-saving initiatives. The company saw an operating margin of 16.9% of total revenues, up 920 basis points year over year.

Guidance

athenahealth reiterated its fiscal 2018 financial guidance.

The company expects revenues in the range of $1.31-$1.38 billion. Meanwhile, the Zacks Consensus Estimate for revenues is pegged at $1.35 billion.

The company expects adjusted operating income in the range of $210-$235 million. Adjusted operating margin is expected in the band of 16% to 17% of net revenues for 2018.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been 11 revisions higher for the current quarter compared to nine lower.

athenahealth, Inc. Price and Consensus

 

athenahealth, Inc. Price and Consensus | athenahealth, Inc. Quote

VGM Scores

At this time, ATHN has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks style scores indicate that the company's stock is suitable for growth and momentum investors.

Outlook

Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. Notably, ATHN has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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