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Why Allscripts Healthcare Solutions, Inc. Gained 12.4% Today

What happened

After announcing better-than-expected sales, an acquisition, and increased guidance for 2017, shares in Allscripts Healthcare Solutions (NASDAQ: MDRX) rallied 12.4% higher today.

So what

Allscripts Healthcare's IT software solutions are used by healthcare providers to manage patient care. In the second quarter, demand for those software solutions was greater than anticipated within the acute-care market.

IMAGE SOURCE: GETTY IMAGES.

As a result, Allscripts Healthcare reported GAAP revenue of $426 million, up 10% from one year ago. Software delivery, support, and maintenance revenue totaled $279 million on a GAAP basis, up 12% from one-year ago, while client-services revenue totaled $147 million on a GAAP basis, up 7%. The company's recurring revenue, such as subscriptions and support and maintenance, increased 11%.

Gross margin of 44% percent compared favorably to the 43.1% rate last year. Meanwhile, the company's adjusted net income totaled $27 million, which was flat versus Q2 2016. The company's adjusted earnings per share (EPS) of $0.15 was $0.01 higher than last year. 

Management also said that it's agreed to buy McKesson Corporation's (NYSE: MCK) hospital and health-systems business for $185 million in cash. The deal boosts its presence in the community-hospital setting and increases cross-selling opportunities. The acquisition doubles Allscripts current EHR (electronic health record) client count in the United States.

Now what

Allscripts Healthcare's solid quarter led management to boost its sales outlook to between $1.79 billion to $1.82 billion from prior guidance of between $1.71 billion to $1.74 billion. The guidance reflects the company's expectation that it will close on its acquisition in the fourth quarter. The company also affirmed its adjusted EPS outlook for growth of between 10% to 15%.

Additionally, the company increased its compound annual-growth outlook for 2018 to 2020. It now expects revenue growth of between 9% to 11%, up from between 6% to 8%, and adjusted EPS of 17% to 20%, up from 12% to 15%.

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Todd Campbell has no position in any stocks mentioned. His clients may have positions in the companies mentioned. The Motley Fool recommends McKesson. The Motley Fool has a disclosure policy.