Allscripts... Just When You Thought It Was Safe (MDRX)

Allscripts Healthcare Solutions Inc. (NASDAQ:MDRX) is trading at a new 52-week low after a disaster earnings report this afternoon.  Non-GAAP adjusted earnings for the quarter ended September 30, were $6.7 million, or $0.11 per diluted share, quarterly revenues were $73.4 million, and gross margin percentage was 50.1%.  Unfortunately, First Call had estimates at $0.15 EPS and $77.6 million in revenues.

Allscripts updated 2007 targets of Non-GAAP adjusted earnings per diluted share outlook to a range of $0.48 to $0.49 and revenue to a range of $286 million to $288 million, but First Call had estimates at $0.58 EPS and $298.9 million in revenues.

Its new 2008 targets are for annualized growth in Non-GAAP EPS is expected to be 40% to 45%, which is an interpolated $0.679 to $0.703.  First Call has estimates at $0.79.  Its 2008 forecast for revenue is 20% to 25% growth, which at the mid-points generates a target of $344.4 million to $358.75 million.  Unfortunately First Call has estimates at $375.6 million.

Sometimes being a growth stock in healthcare isn’t quite what investors think.  Shares closed down over 2% today at $23.00, and the 52-week trading range was $22.21 to $31.38.  But shares in after-hours have lost almost 1/4 of their value and trading at a new 52-week low of $17.40.  Ouch.

The company provides clinical software and connectivity/IT solutions for doctors: Software and Related Services, Information Services, and Prepackaged Medications.  It sure sounds like some of the salespeople aren’t hitting their targets.  Or maybe their IT solutions just aren’t up to task.

Why does it feel like the company will need to seek to become part of a larger company to please shareholders after this trainwreck?

Jon C. Ogg
November 8, 2007