Here's Why Allscripts Healthcare Solutions Is Tanking

What happened

In response to announcing fourth-quarter results, shares of Allscripts Healthcare Solutions (MDRX +0.00%), a healthcare information technology company, fell 11% as of 3:25 p.m. EST on Friday.

So what

Here's a review of the headline numbers from the quarter:

• Non-GAAP revenue declined 2%, to $538 million. That was significantly behind the $563.9 million in revenue that Wall Street was predicting.
• Fourth-quarter bookings grew 69%, to $531 million.
• Contract-revenue backlog was $3.9 billion at year-end. That represents a sharp decline from the $4.7 billion that was recorded last quarter.
• Non-GAAP gross margin fell 70 basis points, to 47.1%.
• Non-GAAP net income grew 7%, to $35 million, or $0.20 per share. That was below the $0.21 that analysts were expecting.
• Management closed its sale of Netsmart and realized a gain of $500 million. That money was used to repay debt.

Image source: Getty Images.

Here's the guidance that's being shared with investors:

• First-quarter non-GAAP revenue is expected to come in between $430 million and $440 million. That's substantially below the $513.9 million that Wall Street was expecting.
• Full-year bookings are expected to land between $900 million and $1 billion. However, a full-year revenue range was not provided.
• Full year non-GAAP earnings per share is expected to land between $0.65 and $0.70. That's well below the $0.81 that analysts had modeled.

Given the disappointing quarterly results and guidance, it isn't hard to figure out why shares are getting whacked today.

Check out the latest Allscripts earnings call transcript.

Now what

Allscripts' management team was quick to point out on the conference call with investors that its results will be lumpy from quarter to quarter. However, the company still expects to grow its revenue at a compound annualized growth rate of at least 5.5% over the next three years.

Since Allscripts has a mixed history of meeting expectations, I wouldn't be in a rush to own this stock, even with today's discount. Instead, my preference is to focus my time and capital on more promising businesses.