Wednesday, February 14, 2007

Color on quarter: Allscripts (NASDAQ:MDRX)

- Couple of firms are commenting on Allscripts (NASDAQ:MDRX) after the co reported Q4 results last night:

- JP Morgan notes Allscripts yesterday reported 4Q06 cash EPS of $0.21, in line with their expectations and consensus. GAAP EPS of $0.08 was $0.01 ahead of firm's estimate.

Software bookings of $61.4M were ahead of JPM $59.8M estimate, and two large PI deals drove total bookings to $75.5M, compared to $64.7M projection. Revenue of $63.6M was $2.2M shy of firm's projection, driven by a shortfall in meds revenue. The quarter overall was in line with expectations. Management maintained prior 2007 guidance, calling for revenue in excess of $300M and GAAP EPS of $0.42-$0.44.

Management announced that Joe Carey, COO, will be leaving the company for personal reasons. The company has begun a search for a new COO, and Mr. Carey will assist with the transition. They do not view Mr. Carey's departure as a material negative for the firm given a relatively decentralized structure.

Firm maintains OW recommendation. They believe management is conservative in its 2007 guidance and believe a number of initiatives currently underway could deliver additional EPS upside in 2007.

- William Blair notes Allscripts posted a very solid fourth quarter to top off an outstanding 2006. Although fourth-quarter revenue and EPS were slightly below and in line with their expectations, respectively, the firm notes that the company still generated 40% organic growth in its software business, allowing management to achieve their full-year guidance.

Fourth-quarter revenue of $63.6 million was slightly below firm's and the consensus expectations, partially due to a slight shortfall in the software segment (relative to expectations) but more significantly due to lower-than-expected revenue in the medications segment. While the firm is disappointed to see this, they still believe the software business remains very strong, and notes management still met their full-year guidance.

More important, in their opinion, was the software bookings metric, which was well ahead of firm's estimate and up a staggering 48% year-over-year for both the quarter and the full year in the base business. In a greenfield end-market, the firm continues to view bookings as the most important metric by which to gauge the future potential of the business, andthey note that bookings this quarter as well as management's bookings guidance continue to indicate to us that 2007 and 2008 should be solid years of growth as well. Net net, they continue to believe the end-market for electronic medical records remains strong, and they continue to view management's execution in the marketplace as among the best in the HCIT industry. Management essentially reiterated its prior 2007 guidance, although they note that they reduced their pro forma EPS estimate by $0.01 to account for a slightly higher-than-anticipated tax rate.

Maintains Outperform rating.

Notablecalls: The stock traded as low as $26.75 in after market action as market participants sold the stock due to lack of usual beat and raise. Can bookings and backlog save the day? Again, the situation is similar to the ones we've seen in TZIX and KNDL (see archives). I would be an opportunistic buyer around the $26.50 level but would not risk more than say $0.50.

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