UPDATE: Goldman Sachs Lowers PT on Nuance Communications on Revenues and EPS
In a report published Friday, Goldman Sachs reiterated its Neutral rating on Nuance Communications (NASDAQ: NUAN), but lowered its price target from $24.00 to $22.00.
Goldman Sachs noted, “Slowing organic growth (8% in 1Q13 versus 11% in 4Q12) and the reduced outlook (2013 revenue and EPS outlook lowered by 1% and 4%, respectively) highlight a risk that the transition to the Clinical Documentation opportunity may take longer than expected to drive earnings. The slowing organic healthcare growth (3% in 1Q versus high-teens a year ago despite capacity investments in 2011) illustrate a stronger headwind from reduced transcription revenues with the adoption of EMR systems and Dragon. While Clinical Documentation solutions (ICD-9 to ICD-10) should help offset the sluggishness, we see increased risk that the company doesn't meet its goal of $1bn in healthcare revenue in FY13, even with the help of J.A. Thomas and Associates and Quantim. Moreover, investments in S&M and R&D early in the year alongside further reduced gross margins (guidance now at 200-250 bps compression versus 100-200 bps previously) dampen margins near term, increasing risk of an EPS shortfall if growth acceleration does not materialize.”
Nuance Communications closed on Thursday at $24.55.
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