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Why Is AllScripts (MDRX) Down 7% Since Last Earnings Report?

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It has been about a month since the last earnings report for AllScripts Healthcare (MDRX - Free Report) . Shares have lost about 7% in that time frame, underperforming the S&P 500.

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

Allscripts Q3 Earnings Beat Estimates, Improve Y/Y

Allscripts Healthcare Solutions, Inc. reported third-quarter 2019 adjusted earnings per share of 17 cents, which beat the Zacks Consensus Estimate of 16 cents by 6.3%. The bottom line also improved 6.3% on a year-over-year basis.

On a non-GAAP basis, revenues totaled $444.6 million, which missed the Zacks Consensus Estimate by 1.2%. However, the top line climbed 1.1% year over year. Moreover, on a reported basis, revenues amounted to $444.2 million in the quarter, reflecting year-over-year improvement of 2.7%.

Bookings came in at $236 million, significantly up by 19.2% from the prior-year quarter’s tally.

Segment Details

In a bid to focus on the payer and life sciences market and evolution of the healthcare IT industry, the company realigned its segment reporting structure by selling its stake in Netsmart on Dec 31, 2018.

The new Provider segment consists of the core integrated clinical software applications, financial management and patient engagement solutions targeted at clients across the entire continuum of care. Meanwhile, the new Veradigm segment primarily focuses on the payer and life sciences market.

Software delivery, Support and Maintenance

In the quarter under review, revenues at the segment amounted to $284.4 million on a reported basis, up 3.7% from the year-ago quarter's tally.

Client Services

At this segment, revenues totaled $159.8 million, up 0.9% from the year-ago quarter's figure.

Margins

Gross profit in the third quarter was $175.3 million, down 1.6% from the year-ago quarter's level. As a percentage of revenues, gross margin was 39.5%, down 170 bps from the year-ago figure.

Adjusted gross profit amounted to $192 million, down 3.9% year over year. Adjusted gross margin was 43.2%, down 220 bps from the prior-year quarter.

Adjusted operating income in the quarter was $44.1 million, down 11.6% year over year. Adjusted operating margin was 9.9%, as a percentage of revenues, down 140 bps from the prior-year quarter.

Financial Update

As of Sep 30, 2019, cash and cash equivalents totaled $129.3 million, down 6.9% sequentially.

Net cash from operating activities for the three months ended Sep 30, 2019, amounted to $35.8 million, soaring 138.7% from the prior-year quarter.

2019 Guidance

For 2019, adjusted EPS outlook is now expected in the range of 67-70 cents. The Zacks Consensus Estimate is pegged at 68 cents, within the projected range.

For fourth-quarter 2019, adjusted revenues are expected between $460 million and $470 million. The Zacks Consensus Estimate is pegged at $462.2 million, within management’s guided range.

The company continues to project full-year bookings between the range of $1.05 billion to $1.10 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

Currently, AllScripts has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% 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.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise AllScripts has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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