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MedAssets shares slump on 4Q outlook

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October 31, 2013 02:59 PM EST | AP

NEW YORK (AP) — Shares of MedAssets slumped Thursday after the hospital software maker gave a weak fourth-quarter forecast.

THE SPARK: MedAssets said Wednesday that it expects to report adjusted earnings of 21 cents to 28 cents per share over the last three months of the year. It projected revenue of $161 million to $167.1 million, compared to $163.8 million in the fourth quarter of 2012.

Analysts were anticipating earnings of 31 cents per share and revenue of $170.1 million in the fourth quarter, according to FactSet.

MedAssets said it expects greater costs from investments in IT infrastructure and other items, which will affect its net income. It said revenue from performance-related fees will continue to decline.

THE BIG PICTURE: In the third quarter MedAssets said its net income rose to $6.9 million, or 11 cents per share. The company said it earned 31 cents per share If one-time items like amortization, depreciation costs, and charges related to acquisitions are excluded. That's down from 32 cents per share a year ago. Its revenue rose 2 percent to $166.4 million as administration and consulting fees improved and performance-related fees decreased.

Analysts were expecting earnings of 30 cents per share and $167 million.

The Atlanta company tweaked its outlook for the full year and is now forecasting net income of $1.27 to $1.31 per share on $671 million to $677 million in revenue. Its previous guidance called for net income of $1.26 to $1.32 per share and $673 million to $683 million in revenue.

Analysts had forecast net income of $1.32 per share on revenue of $680.6 million.

THE ANALYSIS: Several analysts took positive views on the company's results. Greg Bolan of Sterne Agee said he thinks the company will do well as changes in the health care industry make hospitals more vigilant about managing costs and ensuring bills are paid. Bolan said he thinks the company's fourth-quarter outlook is conservative.

William Blair & Co. analyst Ryan Daniels said the changes to the company's annual guidance were minor, but investors were expecting MedAssets to reach the high end of its projections.

SHARE ACTION: MedAssets shares fell $3.37, or 12.9 percent, to $22.71 in afternoon trading. The stock has climbed 48 percent in 2013.