Allscripts' Fundamentals Strong Amid Stiff Competition

On Feb 26, we issued an updated research report on Allscripts Healthcare Solutions MDRX. While the company's strong fundamentals and acquisitions are major positives, rising operating expenses and integration risks remain major concerns. The stock carries a Zacks Rank #3 (Hold).

In the fourth quarter of 2017, the provider of information technology solutions to healthcare organizations witnessed strong financial results on strength in U.S. Core Solutions and Services, which was buoyed by the Sunrise electronic health record (EHR) platform and Allscripts Revenue Cycle Management Services. Notably, revenues in the quarter increased 27% on a year-over-year basis, while earnings per share saw 28.6% growth.

The company also has strong subsidiaries like Netsmart and CarePort, which are gaining from favorable market trends. Moreover, the company's EHR agnostic tools, including dbMotion, EPSi, FollowMyHealth and 2bPrecise, are delivering strong results. These platforms have been gaining clients quite frequently. Furthermore, the company's alliance with Optums has been strong.

Allscripts has also been benefitting from its acquisitions. Lately, the company signed an agreement to takeover Practice Fusion with a view to drive innovation. Moreover, the company recently expanded its strategic partnership with OptimizeRx Corp., a leading provider of digital health messaging.

Allscripts' fourth quarter has seen active expansion of international business. Notably, the company introduced Maidstone in the U.K. It continues to expand its footprint in Australia on continued sale of the Sunrise-BOSSNet EHR platform to hospitals in Western Australia. Allscripts also initiated operations in Costa Rica with its flagship Sunrise platform.

On the flip side, in the fourth quarter, the company saw a 27% year-over-year rise in operating expenses. This was primarily due to the acquisition of EIS business of McKesson and a long sales cycle which involves decision-making at different managerial levels. This increases the company's operating expenses and might result in cancellation of orders.

Allscripts' continued dependence on acquisitions is also likely to pose substantial integration risks. To add to the woes, the company faces stiff competition from large players like Epic and Cerner in the Healthcare Information Technology space.

Allscripts has been underperforming the industry in the past year. The stock has gained 13.2%, compared with the industry's gain of 18.8%.

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