Why Allscripts Healthcare Solutions Shares Popped
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of health care information technology company Allscripts Healthcare Solutions (NAS: MDRX) rallied as much as 24% today after announcing its second-quarter earnings results.
So what: For the quarter, Allscripts reported a 3.7% increase in revenue to $370 million, which was right in line with analysts' projections, and a profit of $0.16, which fell $0.02 shy of expectations. Overall bookings fell $50 million year over year while gross profit dipped by 530 basis points. The big news moving the stock higher relates to Allscripts guidance which calls for the company to earn $0.77-$0.83 in EPS for fiscal 2012, which is notably higher than Wall Street's consensus estimate of $0.74.
Now what: But don't get too excited. Allscripts also aggressively repurchased $225 million worth of stock during the quarter, or 21 million shares. The boost in annual EPS merely reflects the fact that Allscripts reduced its outstanding share count and not from actual growth. Here's yet another case of a company trying to mask weak growth behind share buybacks. Just as we saw in the first quarter, operating expense growth vastly outpaced revenue growth (12.4% vs. 3.7%) and this marked the second-straight quarterly EPS miss. With a management shake-up still fresh in everyone's minds, I'm not buying into today's optimism and would prefer to stay away from Allscripts for the time being.
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The article Why Allscripts Healthcare Solutions Shares Popped originally appeared on Fool.com.Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.