WebMD Lowers Guidance for Third, Fourth Quarters - TheStreet

WebMD Lowers Guidance for Third, Fourth Quarters

It cites a shortfall in sales to doctors and the impact of new data-handling standards.
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WebMD

(HLTH)

said earnings and revenue will trail guidance in both the third and fourth quarters because of a shortfall in its sales of services to doctors and the implementation of a new, congressionally mandated set of data-handling standards.

Shares were recently falling 96 cents, or 10.7%, at $8 in Instinet premarket trading.

The Elmwood Park, N.J.-based company said third-quarter earnings from continuing operations will be 3 cents a share, while income from continuing operations before taxes and various charges will be 9 cents a share. Wall Street's consensus is for earnings of 11 cents a share. The company earned 8 cents a share in the year-ago quarter.

Third-quarter revenue is expected to be $250 million, which is below analysts' estimates of $258 million.

WebMD said lower revenue and increased spending to meet its obligations under the Health Information Portability and Accountability Act of 1996 resulted in the lower-than-expected earnings. The act mandates new data-handling standards among health care providers and insurers.

WebMD also cited lower transaction volume in its transaction services division and lower-than-expected systems implementations and support and maintenance revenue in its physician services division. The company said an extended period of testing and implementation under the Health Information Act contributed to the lower-than-anticipated revenue in its transaction services division.

Looking to the fourth quarter, WebMD said income from continuing operations before taxes, noncash, and restructuring is forecast to be 10 cents a share, compared with analysts' consensus of 13 cents a share. Income from continuing operations is expected to be 4 cents a share.

The company expects total sales of $255 million to $265 million, again below analysts' projections of $270 million. Sales were $241 million in the prior-year fourth quarter.

The company said its revised fourth-quarter guidance is mainly due to lowered expectations for transaction services sales from the lengthening of its transition to the new standards. WebMD also cited lower-than-expected transaction volumes in patient statement product offerings.

WebMD said its preliminary third-quarter results and outlook for the fourth quarter do not include the impact of any incremental expenses related to a

previously announced Justice Department investigation.