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UPDATE: Citigroup Downgrades Quality Systems to Sell; Pre-Announcement Concerns

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Citigroup lowers its rating from Neutral to Sell on Quality Systems (NASDAQ: QSII) and reduces its price target from $45 to $26 as the latest pre-announcement reflects longer term causes for concern.

Citigroup says, "Quality Systems negatively preannounced F4Q results. Sales are now expected to reach $107-$111M, or 5-9% below $117M consensus; and EPS in the range of $0.24-$0.27, or 29-37% below $0.38 consensus. Management cited delays in closing several deals and the delayed revenue recognition related to a large project. FY13 sales guidance implying $514-$534M is above the Street's current $509M estimate & appears encouraging, but EPS guidance implying $1.52-$1.63 is well below $1.72 consensus. We are lowering our estimates on an increasingly unfavorable outlook, noting that management telegraphed business weakness at a conference last week."

QSII closed at $29.90 on Friday.

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