KeyBanc Downgrades Computer Programs and Systems (CPSI) to Underweight

KeyBanc downgraded Computer Programs and Systems (NASDAQ: CPSI) from Hold to Underweight with a price target of $55.00.

Analyst Donald Hooker said, "We are downgrading our rating on Computer Programs and Systems to UNDERWEIGHT (from HOLD) following our channel feedback, which we believe shows that competition in the small hospital HCIT market may be intensifying. Accordingly, we see potential downside to growth expectations in CY15 for revenues (KBCM of 3.8% vs. consensus of 5.4%) and EPS (KBCM of 3.2% vs consensus of 8.3%)."

"Looking forward, we think that CPSI’s growth and profitability may be challenged by strengthening competition, most notably from: 1) Healthland (private), which is CPSI's largest competitor in the small/rural hospital market; and from 2) Epic Systems (private), which is a vendor more typically associated with larger hospital settings. Healthland appears to have been generally successful migrating its hospital customers to a more modernized (and defensible) software system, in our view," he continued.

"Our bull case thesis is that CPSI might benefit from customer attrition related to this migration. However, based on our checks, we think that there are only about a dozen or so hospitals that have switched (or plan to switch) away from Healthland so far in 2014. (And, we are not aware of any Healthland hospital switching to CPSI so far this year.) Moreover, the recent one-year delays of the HCIT Stimulus and the ICD-10 conversion will give Healthland a broader window to execute its migration, in our view. Also, Epic Systems appears to be more active in the small hospital space with its extension programs," he added.

For an analyst ratings summary and ratings history on Computer Programs and Systems click here. For more ratings news on Computer Programs and Systems click here.

Shares of Computer Programs and Systems closed at $65.70 yesterday.

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