MedAssets Stock Gets A Lift On Plans To Cut 5% Of Jobs

MedAssets (MDAS) stock got a lift Wednesday after the medical software maker announced plans to cut 5% of its workforce, or roughly 180 jobs, by year’s end.

MedAssets stock was up 4.5% in afternoon trading in the stock market today, near 20. On Tuesday, shares touched a nearly six-month low, below 19.

MedAssets expects restructuring expenses of $11 million, with $5 million of that to be recorded in the third quarter and the remainder in Q4. The company says the reduction should bring $21 million in savings, adding 4 cents to 5 cents a share to 2015 earnings. Analysts polled by Thomson Reuters now expect full-year earnings of $1.23 a share for 2015, down from $1.35 last year.

Analysts said the cuts would enable the company to get its costs in line with expected 2016 revenue, as the company recently lost a key contract with Tenet Healthcare (THC), but they weren’t raising their ratings on the stock.

“On the one hand, we are impressed by today’s announcement of $21 million in cost savings and the rationalization of underperforming products. Also, (MedAssets) has a large client footprint and deep domain expertise in important areas such as supply chain and revenue cycle,” KeyBanc Capital Markets analyst Donald Hooker said in a note to clients. “On the other hand, it is difficult to be more bullish on a company that lacks a clear go-to-market strategy or top-line growth trajectory.”

FBR & Co.’s Steven Halper called the action a “good first step” for MedAssets.

“Based on the company’s press release, further strategic changes and restructuring actions are possible,” Halper said in a research note. “At this juncture, it is difficult for us to predict what the potential next steps might be, especially given that senior management has not been very communicative with the investment community (based on our perspective).”

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MedAssets competes with the likes of Cerner (CERN), Athenahealth (ATHN) and Allscripts Healthcare SolutionsMDRX.

Follow Russ Britt on Twitter @IBD_RBritt and on Facebook.

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