Quality Systems Inc. (QSII) is set to report third-quarter 2015 results on Jan 22. In the previous quarter, the company posted earnings of 12 cents, which missed the Zacks Consensus Estimate by a penny. On an average, Quality Systems delivered negative earnings surprise of 22.83% in the last four quarters.
Let’s see how things are shaping up for this quarter.
Factors to Consider this Quarter
We believe that continued strength in Quality System’s NextGen division as well as the expected benefit from its Mirth acquisition will drive overall results. Further, strong demand for the other NextGen solutions that include hospitals, EHR and practice management are also expected to drive top-line growth.
NextGen’s Inpatient Clinicals, Lab and Patient Portal EHR solutions have also been gaining considerable traction. Moreover, Quality System’s NextGen RCM platform continues to win contracts from healthcare providers.
However, we think that higher operating expenses will continue to hinder profitability. Also, a sluggish global economy and a strict regulatory environment remain a headwind for the company.
Earnings Whispers?
Our proven model does not conclusively show that Quality Systems 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.
Zacks ESP: Quality Systems currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 13 cents.
Zacks Rank: Quality Systems’ Zacks Rank #3 (Hold) increases the predictive power of ESP. However, we also need to have a positive ESP to be confident about an earnings beat.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
HCA Holdings (HCA) with an Earnings ESP of +5.74% and a Zacks Rank #1 (Strong Buy).
AbbVie (ABBV) with an Earnings ESP of +1.18% and a Zacks Rank #2 (Buy).
McKesson Corp (MCK) with an Earnings ESP of +1.91% and a Zacks Rank #2.
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