Allscripts Healthcare Solutions, Inc. MDRX is well poised for growth in the coming quarters, backed by its strategic alliances over the past few months. A robust first-quarter 2022 performance and its business model are expected to contribute further. Yet, concerns related to healthcare regulatory changes and stiff competition persist.
Over the past year, this Zacks Rank #3 (Hold) stock has lost 17.5% compared with the 56.4% fall of the industry and 9.2% decline of the S&P 500.
The renowned IT solutions and services provider has a market capitalization of $1.79 billion. The company projects 16.3% growth over the next five years and expects to maintain its strong performance. MDRX’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed the same in one, the average earnings surprise being 49.4%.
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Let’s delve deeper:
Strategic Alliances: We are optimistic about Allscripts’ partnerships over the past few months. During its first-quarter 2022 earnings call in May, the company confirmed that in April, its practice management, patient registration and scheduling platform were selected by the U.S. Department of State for deployment to over 200 designated health units housed within MSCs and missions around the globe.
The company, in March, announced an agreement with the U.S. Social Security Administration.
Business Model: Allscripts delivers IT solutions and services to help healthcare organizations achieve optimal clinical, financial and operational results, which raise our optimism about the stock. The company sells its solutions to physicians, hospitals and governments, to name a few, besides post-acute organizations such as home health and hospice agencies. Allscripts helps its clients improve the quality and efficiency of healthcare with solutions that include electronic health records (“EHR”), information connectivity, private cloud hosting, outsourcing, analytics, patient access and population health management. It derives its revenues primarily from sales of proprietary software, support and maintenance services, and managed services.
Strong Q1 Results: Allscripts’ solid first-quarter 2022 performance buoys optimism regarding the stock. The year-over-year uptick in both top and the bottom lines is impressive. Revenues from both segments also rose during the quarter, which is encouraging. In March, Allscripts announced the relaunch of its former Application Store as the Allscripts App Expo, which raises our confidence in the stock. Expansion of gross margin is another positive.
Healthcare Regulatory Changes: Allscripts may be subject to pricing pressures with respect to future sales arising from various sources, including practices of managed care organizations, group purchasing arrangements made through government programs, government action affecting reimbursement levels or any combination thereof under Medicare, Medicaid and other government health programs. The company’s clients and the other entities with which it has business deals are affected by such changes.
Stiff Competition: Allscripts operates in a highly competitive industry characterized by rapidly evolving technology and solution standards, user needs, as well as frequent introduction of new solutions and services. Some competitors may be more established, benefit from greater recognition and have substantially greater resources than Allscripts. The company competes primarily with various types of organizations, including those providing ambulatory and acute care EHR solutions, among others.
Allscripts is witnessing a negative estimate revision trend for 2022. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 18.6% south to 83 cents per share.
The Zacks Consensus Estimate for the company’s second-quarter 2022 revenues is pegged at $147.6 million, suggesting a 60.5% plunge from the year-ago reported number.
Some better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. AMN, Omnicell, Inc. OMCL and Masimo Corporation MASI.
AMN Healthcare, carrying a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 1.1%. AMN’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 15.6%.
You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare has gained 11.6% against the industry’s 50.7% fall in the past year.
Omnicell, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 20%. OMCL’s earnings surpassed estimates in three of the trailing four quarters and missed the same in the other, the average beat being 13.4%.
Omnicell has lost 19.2% compared with the industry’s 56.4% fall over the past year.
Masimo, carrying a Zacks Rank #2 at present, has an earnings yield of 3.3% against the industry’s negative yield. MASI’s earnings surpassed estimates in the trailing four quarters, the average beat being 4.4%.
Masimo has lost 44.2% compared with the industry’s 25.4% fall over the past year.
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