athenahealth, Inc. (ATHN) is scheduled to release third-quarter 2014 earnings on Oct 16, after the closing bell. In the previous quarter, athenahealth delivered a handsome 350% positive earnings surprise on the back of higher revenues, driven by an expanded network of healthcare providers. Let’s see how things are shaping up for this announcement.
Factors at Play
This leading provider of cloud-based services and mobile tools for medical groups and health systems has been witnessing an increased adoption of its electronic health record (EHR), revenue cycle management and patient engagement services. Additionally, athenahealth continues to expand its network of healthcare providers which currently comprises over 55,000 providers in athenaNet.
athenahealth has implemented a growth strategy across the U.S. through which the company plans to expand its foothold in major health care technology markets by focusing on research and development activities and mobile innovation.
However, we are concerned with athenahealth’s escalating costs and capital expenditures along with the lower return on equity (6%) compared to its peer group (9.7%) in the last reported quarter.
Meanwhile, athenahealth’s quarterly activities failed to impress analysts. Hence, the Zacks Consensus Estimate for the third quarter remained unchanged at 6 cents per share over the last 60 days.
Earnings Whispers
Our proven model does not conclusively show that athenahealth is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here as you will see below:
Earnings ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at 0.00% as both these parameters stand at 6 cents.
Zacks Rank: athenahealth’s Zacks Rank #1 (Strong Buy) increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings beat.
Stocks to Consider
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Abaxis, Inc. (ABAX) with an earnings ESP of 4.55% and a Zacks Rank #2 (Buy).
Hologic Inc. (HOLX) with an earnings ESP of 5.41% and a Zacks Rank #3 (Hold).
Heartware International Inc. (HTWR) with an earnings ESP of 21.21% and a Zacks Rank #3 (Hold).
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