2011-12 License for Allscripts – Analyst Blog
In a positive development, Allscripts Healthcare Solutions (MDRX) recently received 2011-12 compliance and Complete Electronic Health Record (EHR) module certification for its Allscripts ED 7.0 from the Certification Commission for Health Information Technology (CCHIT) on March 2, 2011.
This Allscripts ED 7.0 is an Emergency Department Information System (EDIS) that provides improved patient throughput and ensures patient safety while exchanging the clinical information in the healthcare community. In September 2011, the previous version (6.3) of Allscripts ED had received the 2011-12 compliance certificate as an EHR Module by CCHIT.
Based on its recent recognition, Allscripts is expected to benefit from an under-penetrated, but rapidly growing segment of the healthcare information technology space. More than 1,300 Critical Access Hospitals serving rural America are now expected to participate under the American Recovery and Reinvestment Act (ARRA) by using EDIS.
Allscripts' EHR is a software that automates the process of writing prescriptions. The EHR system enables physicians to send prescriptions directly to a pharmacy by e-mail. It has been proven that the effective use of EHR systems reduces medical errors, enhances clinical quality and leads to better patient outcomes by accessing patient records in real time.
The U.S. government is increasingly emphasizing the use of EHR systems these days. This is evident from the Medicare Improvements for Patients and Providers Act that provides financial incentives to physicians who adopt e-prescribing. The Act requires adoption of this practice by 2011 and delays any reduction in fees for treating Medicare patients.
We believe that the new certification will boost Allscripts' top-line by expanding its client base.
However Allscripts faces strong competition from Cerner Corp. (CERN), Merge Healthcare (MRGE) and MedAssets (MDAS) in a field that is increasingly price sensitive. Moreover the company suffers from lingering global economic weakness.
Currently, we are ‘Neutral’ on Allscripts.
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Neutral on Enbridge Energy Partners – Analyst Blog
We are maintaining our Neutral recommendation on Enbridge Energy Partners, L.P. (EEP), given its fee-based and diversified businesses, along with its increased exposure to the Bakken Shale, the Haynesville Shale and Granite Wash.
This is partially offset by the lower-than-expected results in the fourth quarter of 2010.
Enbridge is engaged in the gathering, processing and transmission of natural gas and crude oil and is best known for its ownership of the Lakehead System, one of the world’s longest petroleum pipeline systems. The partnership’s focus on fee-based and diversified businesses has enabled it to dilute its business risks, as well as provide a stable and steadily growing earnings profile.
We also remain positive on Enbridge given its increased exposure to the Bakken Shale, the Haynesville Shale and Granite Wash. For this year, we expect that the partnership’s Liquids segment should benefit from rising volume stemming from the Bakken Shale and Canadian Oil Sands regions.
Importantly, despite the Line 6A & 6B pipeline oil spills, Enbridge maintained its quarterly distribution rate at $1.0275 per unit during the fourth quarter, or $4.11 per unit annualized. An improving macro environment and growth projects in the emerging resource plays with favorable natural gas liquid (NGL) fundamentals have helped the partnership to retain its long-term distribution growth rate at 2%–5%.
Besides, Enbridge’s September 2010 acquisition of Elk City Gathering and Processing System for $682 million will expand the partnership’s exposure in the liquids-rich Granite Wash region.
However, we remain on the sidelines given Enbridge’s lower-than-expected fourth-quarter 2010 results attributable to higher operating costs in liquids and natural gas segments. These were countered partially by additional revenues from liquid pipelines resulting from the incremental volumes and rates associated with Alberta Clipper and North Dakota expansions.
Notably, Enbridge’s cash distribution growth profile does not compare favorably with the other players in the master limited partnership (MLP) space, reflected in its discounted valuation. Additionally, spills on lines 6A and 6B are expected to wrought earnings volatility over the next few quarters and may delay cash distribution growth.
The Houston-based partnership expects 2011 organic capital spending of $1.14 billion, 61% of which comprises liquid-rich projects and the remaining 39% Natural Gas projects. Although the partnership’s organic capex guidance remains encouraging for 2011, it expects its maintenance capital outlay to nearly double to $120 million in 2011 from $66 million in 2010, largely due to pipeline integrity spending.
Taking into account the aforesaid factors, we expect Enbridge to perform in line with the broader market exemplified by its Zacks #3 Rank, equivalent to a short-term Hold rating. Enbridge competes with Enterprise Products Partners LP (EPD), Kinder Morgan Energy Partners L.P. (KMP) and Energy Transfer Partners (ETP).
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Accenture to Serve BBVA – Analyst Blog
Yesterday, Accenture plc (ACN) clinched a deal with Banco Bilbao Vizcaya Argentaria, S.A. (BBVA). Per the terms of the deal, Accenture will provide its Alnova Financial Solutions technology platform to help develop the core banking system (CBS) in BBVA’s U.S. banking subsidiary.
Banco Bilbao Vizcaya Argentaria provides financial services, which includes retail banking, asset management, private banking and wholesale banking businesses, across the world.
With the help of Accenture’s core banking solution, BBVA’s subsidiary, BBVA Compass will be able to establish process banking operations more quickly, which will help to retain customers and also improve the efficiency of its product marketing.
Core banking systems form the backbone of a bank's IT infrastructure. Under this system, unified banking services are provided by a group of networked bank branches. Bank customers can access their funds and make other simple transactions from any of the member branch offices.
Accenture’s Alnova Financial Solutions is a core banking solution, which is owned by its subsidiary Alnova Technologies Corp. The solution will deliver real-time bank processing capabilities and support increased transaction volumes for BBVA Compass while streamlining and enhancing the bank’s risk management functions.
Accenture’s core banking solution has already been used by BBVA in its operating units spread across nine countries. This recent agreement furthers the relationship and we believe that the need for CBS will increase the demand for Accenture’s banking solution.
Accenture has seen successes across various industrial sectors as well as geographical regions. Recently, the company won a 5-year consulting and outsourcing services contract from CEVA Logistics and a 2-year information technology services contract from Israel Electric Corporation.
Accenture also received a 5-year Procurement Transformation contract from the City of London Corporation to develop required shared service centers to reduce procurement costs. Moreover, Consip, a public company owned by the Italian Ministry of Economy and Finance awarded Accenture a four-year, $6 million contract to set up an eProcurement system to increase efficiencies and ensure value for money across suppliers.
We are positive about Accenture’s improving business trends, as evident from the healthy growth in revenue and bookings in its fiscal third quarter. However, the recent economic turmoil in Europe and competitive pressure from IBM Inc. (IBM) could considerably rationalize Accenture’s growth prospects.
Accenture has a Zacks #2 Rank, implying a short-term Buy recommendation.
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NCR Offers New Solution – Analyst Blog
Financial and technology service provider NCR Corporation (NCR) recently secured business from the largest North American provider of intercity bus transportation, Greyhound Lines. As per the terms of the agreement, NCR will provide a new self-service kiosk ticketing solution that will enable the passengers to buy tickets from the Kiosk or get online delivery of the tickets.
NCR will also provide support services for 150 kiosks. In Fact, Greyhound selected NCR technology for its self-service travel solutions, based on NCR’s quality, performance history and comprehensive support services.
The NCR self-service solution will help reduce wait time for Greyhound customers, at the same time freeing up employees who could instead spend more time with customers with more complex travel needs.
As per a report published by Retail Banking Research (RBR), NCR remainsthe world's largest supplier of multi vendor ATM middleware and applicationsfor 23 consecutive years. The report also states that substantially more financial institutions in North Americarely on NCR's APTRATM software suite when compared to the next three providerstaken together. This apart, the research organization also states that NCR has market share leads in Western Europe and Latin America.
We believe the new service will drive penetration at different travel clients, since they can now offer better customer service at remote locations by incurring minimum expense.
As the concept of self-service has been growing, management has decided to expand beyond its traditional financial services markets to new industry verticals such as insurance, entertainment and gaming, healthcare, travel and hospitality, particularly in the public and government sectors.
While we are encouraged by the company’s market leadership, successful acquisitions, new product introductions and new business ventures, fresh investments are yet to come in a big way. We expect its robust business model and aggressive cost-cutting measures to help the company return to growth across all the segments in the medium to long term.
The company has a Zacks #3 Rank (short-term Hold recommendation).
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Whirlpool Fights Korean Dumping – Analyst Blog
Whirlpool Corp. (WHR) recently filed an antidumping petition with the U.S. Department of Commerce and the International Trade Commission against the South Korean government’s subsidies on home appliances, particularly refrigerators.
According to the company, the Korean government has invoked an unfair trade practice by giving unjust subsidies to Samsung Electronics Co. and LG Electronics Inc. over the past several years.
The subsidy policy has led the two South Korean appliance makers to sell their products in the U.S. at a price much lower than their fair value. Consequently, American appliance makers, mainly Whirlpool have been badly affected in the face of intense competition from these imports.
The average retail price of one of the company’s 25-cubic-foot stainless-steel refrigerator models dropped nearly 40% to $1,226 in last year's fourth quarter compared with prices in early 2008.
For Whirlpool’s manufacturing facility at Amana, which produces bottom-mount refrigerators, the situation is worse than the others as the bottom-mount refrigerators are the most severely affected among all other products and models. Bottom-mount refrigerators generally are priced much higher than models with the freezer on top. But similar Korean models are comparatively much cheaper.
However, with increased competition in the domestic market due to unfavorable trade consequences, Whirlpool has strategically targeted the emerging economies, which have huge potential going forward. The emerging economies of Asia and Latin America, particularly China, India and Brazil, are expected to see strong demand for appliances in the near future.
In the last financial year, the company showed notable improvements in Latin America and Asia, despite higher material costs and unfavorable foreign currency fluctuations. Shipments to Latin America climbed 18% while those to Asia jumped 9%.
As a result, Whirlpool exhibited strong performance during fiscal 2010. Net profit almost doubled to $171 million or $2.19 per share from $95 million or $1.24 per share in the prior-year quarter. For full year 2010 net profit increased significantly to $7.97 per share from $4.34 per share in 2009. Sales for the fourth quarter were up 4% year over year to $5 billion while sales for the full year rose 7% to $18.4 billion. The company expects a higher shipment growth of 5%–10% in Brazil and 6%–8% in Asia.
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Netflix Bandwidth Capped in Canada – Analyst Blog
Netflix Inc. (NFLX) subscribers in Canada will now be forced to watch Netflix’s videos at a much lower picture quality due to the enforcement of caps in bandwidth from Canadian Internet Service Providers (ISPs).
The default video quality will now be set at 625 kbps, which Netflix has termed as “good” settings. Subscribers selecting the “better” settings would get a maximum of 1300 kbps in video stream and the “best” quality video would come at up to 4800 kbps. For selecting the two higher versions that transmit more data, the charge would remain at C$7.99 per month for any video size.
Netflix, in an email to its subscribers, confirmed that streaming of a film or television typically for thirty hours consumes 31 gigabytes of data, which would now be reduced to only 9 gigabytes.
We believe that this curtailment in the streaming quality in Canada would hurt Netflix and would be a step backward for the company as the online movie industry is vouching for better video quality at more affordable and competitive prices.
However, Netflix continues to do reasonably well in the U.S., offering significant competition to pay TV channels, as well as companies in the mail order business. Moreover, online video streaming is really catching fire, with hours of viewership increasing significantly over the past year. This is the reason Netflix has been gaining popularity with content providers.
For instance, Netflix recently entered into a multi-year licensing agreement with Paramount Pictures, a division of Viacom Inc. (VIA) in Canada. The deal not only enables Netflix to expand in Canada but will also add to the long list of old and new movie titles from Paramount Pictures in its library. The deal is expected to provide a first hand experience of the movies produced under the Paramount banner to the Canadian subscribers of Netflix.
According to the 5-year agreement, Netflix will be able to stream classical hits as well as new movies that Paramount Pictures produces and gain access to Paramount’s library of 350 films.
Of course competition is clearly heating up, with larger players beginning to show interest in this emerging market of online video streaming. But we continue to believe that the monitoring of partnership opportunities with big Hollywood studios and extraction of strategic agreements with cable companies would enable Netflix to maintain a diversified and upgraded catalog, thus improving its image and driving subscriber growth over the long term.
The fact that Netflix has been troubled with streaming delays from various pay channel providers is worrisome and now this cap on bandwidth that could hamper quality is a real concern. Particularly so, since other ISPs could follow suit. Thus we have a Neutral recommendation on Netflix shares in the long term (3-6 months).
Currently, Netflix has a Zacks #2 Rank, which implies a Buy rating on a short-term basis.
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GM Cruze’s New Height in U.S. – Analyst Blog
General Motors Company (GM) is highly elated to see the record sales of its Chevrolet Cruze small cars in the U.S. The unit sales figure is soon to cross the 50,000 level in the U.S. despite tough competition from imported cars.
Cruze was first launched in late 2009, although it hit the U.S. market in September 2010 replacing the already existing Cobalt model. Since its arrival in the U.S., as many as 32,000 Cruze models have already been sold through February. And with the March figure, total sales in the U.S. will certainly cross the 50,000 bar. However, it is believed that March sales of Cruze would be below February's 18,556 units.
According to the company, the Chevrolet brand has played a crucial role in generating demand in the U.S. market in the face of intense competition from other popular imported brands. Toyota Motor Corp. (TM) and Honda Motor Co. Ltd (HMC) have substantial market shares in the country’s auto industry.
Toyota’s popular Corolla recorded sales of 35,000 units in the comparable period through February whereas Honda’s Civic reached almost 34,000 in the corresponding period.
Inspired by the strong results, GM now expects to sell about 150,000 Cruzes globally in the first quarter of 2011, thereby emerging as the top selling model by surpassing the Chevy Silverado pickup truck.
Demand for vehicles has been improving with the revival of economic conditions. Carmakers want to make best use of this growing demand and reap substantial benefits as well as expand its market share. General Motors' decision to add new models to its existing product portfolio is a well calculated move towards this end.
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Amgen Appeals EU Opinion – Analyst Blog
Amgen (AMGN) is appealing the negative recommendation issued by the Committee for Medicinal Products for Human Use (CHMP) for the use of Vectibix plus chemotherapy in patients with wild-type KRAS metastatic colorectal cancer (mCRC).
The company has requested the European Medicines Agency (EMA) to re-examine CHMP’s opinion.
Negative Opinion Issued in March 2011
The CHMP had adopted a negative opinion regarding Amgen’s marketing authorization application for Vectibix’s label expansion in March 2011. At that time, Amgen had said that it would appeal the opinion.
Results from two studies (PRIME and ‘181) showed that Vectibix plus chemotherapy improved progression-free survival in patients with wild-type KRAS mCRC compared to only chemotherapy. Moreover, Amgen reported a higher response rate in the Vectibix arm compared to chemotherapy alone.
Amgen is looking to drive Vectibix sales by expanding the label into second - and first-line treatment of metastatic colorectal cancer, which will expand the patient base significantly.
Vectibix is currently approved in several countries (excluding the US) as a monotherapy treatment for wild-type KRAS mCRC patients who are no longer responding to standard chemotherapy. Meanwhile, Vectibix is approved in the US as a monotherapy treatment for patients with EGFR-expressing mCRC after the disease has progressed following or while on treatment with fluoropyrimidine-, oxaliplatin-, and irinotecan-containing chemotherapy regimens.
The colorectal cancer market represents huge potential. According to estimates provided by the company in its press release, about 1.23 million cases of colorectal cancer were diagnosed across the world in 2008. In the EU alone, about 333,330 new cases of colorectal cancer were diagnosed in 2008.
Amgen is currently seeking US approval for the use of Vectibix for first- and second-line mCRC. Vectibix' primary competitor is Eli Lilly/Bristol-MyersSquibbs' (LLY/BMY) Erbitux.
We currently have a Neutral recommendation on Amgen. We expect investor focus to remain on the successful commercialization of Prolia/Xgeva.
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BofA Slashes CEO’s Compensation – Analyst Blog
In its regulatory filing on Wednesday, Bank of America Corporation (BAC) stated that CEO Brian T. Moynihan’s compensation in 2010 had been lowered to $1.94 million. Though the CEO’s salary was hiked to $950,000 from $800,000, the stock awards declined to zero from $5.2 million in 2009.
Additionally, BofA also granted $9.05 million as restricted stock awards to Mr. Moynihan, which he would get only on fulfilling certain financial targets. However, as per the Securities and Exchange Commission (SEC) guidelines, these stock awards are taken into consideration in the year when they are paid and not when announced. Therefore, after adjustments, BofA paid nearly $10 million to its CEO.
The performance-based compensation would begin only when BofA’s return on assets (ROA) come to 0.5%. Also, the full payment would require the ROA at 0.8%. The SEC rule also states that only 40% of such awards will be paid in cash and remaining in stock. Furthermore, the cash part would be paid one year after the target is met, while any stock portion would be paid after March 2014.
BofA has also included the “clawback” provision while granting these stock bonuses. As per this provision, these stock bonuses can be withdrawn from the underperforming employees. The clawback provision is an important part of the financial reforms ensuring that bankers avoid short-term risks.
In addition, BofA also paid $270,234 as perks to its CEO. This is quite higher than what he had got in 2009.
Since last year when Mr. Moynihan was appointed as the CEO and the President of BofA, the company has been struggling to remain profitable and suffered huge losses in 2010. Moreover, the company had to write down $10.4 billion for its credit card unit, pay $2.8 billion to Fannie Mae (FNMA) and Freddie Mac (FMCC) to settle home mortgage related claims, and set aside $1.5 million for litigation expenses.
Also, earlier in this month, BofA was denied any increase in its quarterly dividends by the Federal Reserve. In January, the company along with other 18 U.S. banks had submitted their capital plans to the Federal Reserve for the second round of stress test. With the company’s failure to meet the required capital levels, the Federal Reserve has asked it to resubmit it plans.
Concurrently, BofA announced that one of its directors, Mr. William P. Boardman, would step down from the post and would not seek a second term at its annual shareholders’ meeting in May. Earlier in the month, the company’s board of directors named Mukesh D. Ambani, chairman and managing director of India-based Reliance Industries Limited as a director. Mr. Ambani will have to get himself elected at BofA’s 2011 annual meeting of shareholders.
Latest efforts to reduce mortgage repurchase concerns on the government sponsored enterprise (GSE) front are expected to result in manageable losses for BofA. Though the company is poised to benefit from its large scale operations, prudent capital management, non-core asset shedding and improving credit quality, concerns over rising expenses, pressure on net interest yield, and limited claim experience for non-GSEs will check bottom-line expansion in the near term.
BofA currently retains a Zacks # 3 Rank, which translates into a short-term ‘Hold’ rating. Also, considering its fundamentals, we have a long-term “Neutral” rating on the stock.
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Mediware Enters Definitive Agreement to Acquire Certain Assets of CareCentric
Increases Mediware's Customer Base to More Than 700 in the Alternate Care Solutions Market