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Why Is athenahealth (ATHN) Up 10.7% Since the Last Earnings Report?

More than a month has gone by since the last earnings report for athenahealth, Inc. ATHN. Shares have added about 10.7% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? 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 catalysts.

Recent Earnings

athenahealth Inc. reported adjusted earnings of 56 cents per share in the third quarter of fiscal 2017, steering past the Zacks Consensus Estimate of 50 cents. However, earnings lagged the year-ago quarter’s 60 cents.

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The Watertown, MA-based maker of billing and medical practice management software posted revenues of $304.6 million, missing the Zacks Consensus Estimate of $311 million. However, revenues increased 10.1% on a year-over-year basis.

Quarter Highlights

Segment Details: athenahealth reported Business and Services revenues of $295.8 million, up 10.7% from the year-ago quarter. However, the implementation and other segment posted revenues of $8.8 million, down 38.3% from a year ago.

Margin Details: A strong client base has been a major growth driver for the company. Adjusted gross margin in the third quarter was 64%, compared with 65.1% a year ago.

he company saw an operating margin of 13% of total revenue in the third quarter, compared to 15% in the year-ago quarter. Notably, adjusted operating income in the reported quarter was $39.5 million.

Network Expansion: Per management, the company expanded its network across ambulatory, hospital and population health platforms. The company’s network expanded to over 106,000 providers, 102 million unique patient records, and 3.2 million covered lives at the end of the third quarter. 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.

Guidance Revised

athenahealth revised its guidance for fiscal 2017.

For fiscal 2017, the company slashed its revenue guidance to the band of $1,200–$1,220 million from earlier $1,210-1,250 million.

Adjusted operating income guidance has been raised to the range of $135-$150 million from the earlier band of $120-$140 million.

Annual bookings for the fiscal are expected at

around $300-$350 million, as compared with the prior range of $350-$400 million.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed an upward trend in fresh estimates. There have been four revisions higher for the current quarter compared to one lower.

athenahealth, Inc. Price and Consensus

 

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

VGM Scores

At this time, athenahealth's stock has a nice Growth Score of B, though it is lagging a bit on the momentum front with a C. Charting a somewhat similar path, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for growth investors than momentum investors.

Outlook

Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise that the stock has a Zacks Rank #1 (Strong Buy). We are expecting an above average return from the stock in the next few months.


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