We reiterate our Neutral rating on Allscripts (MDRX). Second quarter earnings per share of 19 cents matched the Zacks Consensus Estimate. Allscripts reported sales of $356.8 million in the second quarter, beating the Zacks Consensus Estimate of $353 million.
Allscripts has widened its user-base, after its mergers with Misys and Eclipsys, and increased cross-selling opportunities. While Allscripts is a market leader, in the ambulatory space, with its software generating about 50% of electronic prescriptions in the U.S., Eclipsys, on the other hand, was a leader in physician utilization of Computerized Physician Order Entry.
The acquisition of Eclipsys provides the company with an acute care product for sale in concert with its ambulatory services. Thus, Allscripts’ new multi-billion dollar addressable market is the market segment seeking a composite solution across both physician and hospital practices.
Allscripts has a leading market share in both inpatient and ambulatory settings. Since incumbency is deemed to be the most significant competitive advantage, the company may become a stellar performer.
In reality, selling to hospitals still appears to be a struggle for Allscripts. In fact, the company is unable to meet the pressing demand for integrated ambulatory-acute care Electronic Health Record (“EHR”) packages. Some major competitors, such as Cerner, have long ago developed unified and seamless products serving both inpatient and outpatient segments. It will probably take Allscripts a few more years before it can offer a truly unified platform.
Allscripts continues to benefit from the financial incentive program for medical providers for complying with federal EHR requirements. The size of the opportunity is large and penetration still low. Allscripts must compete with a large number of competitors such as Athenahealth (ATHN), Cerner (CERN) and Quality Systems (QSII).
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