Slower growth in its electronic medical records business, coupled with higher costs in its employee medical expenses, are expected to cut into Computer Task Group’s earnings this summer.
The Buffalo information technology company, which reported lower profits Tuesday, also warned that its third-quarter sales and earnings would be less than they were last year and below some analyst forecasts.
CTG executives blamed the drop on pricing pressures from the IT staffing work that it does for one of its bigger staffing customers, but not IBM, coupled with the higher expenses in its self-insured employee medical plan and the slow pace of new electronic medical records installation projects by cash-strapped hospitals.
“In the short-term, we believe our electronic medical records business will be constrained,” said James R. Boldt, CTG’s chairman and chief executive officer, during a conference call Tuesday. “Given the growth opportunities, we continue to remain optimistic about the long-term prospects for our EMR business.”
CTG’s second-quarter profits were in line with the reduced earnings it warned about earlier this month. The company’s profits fell by 20 percent to $3.2 million, or 20 cents per share, from $4.1 million, or 24 cents per share, a year earlier.
CTG’s revenues slid by 6 percent to $100.3 million from $107.1 million, as sales from the company’s solutions business, which accounts for 40 percent of the firm’s revenues, fell by 5 percent, while its staffing sales dropped by 7 percent.
During the current quarter, CTG said it expects its profits to range between 16 cents and 18 cents per share, compared with 23 cents per share a year ago. That’s less than the 20 cents per share that analysts were expecting. CTG said it sales are expected to fall to between $96 million and $98 million, down 4 percent from $100.7 million a year ago.
Boldt said hospitals continue to delay big investments in costly electronic medical records projects as they grapple with lower government reimbursement rates. The company also expects its employee medical expenses to be higher than it initially forecast in the future, he said.
For all of this year, CTG said, it expects its sales to fall by about 6 percent to $390 million to $400 million, with its earnings per share dropping by 15 percent to between 75 cents and 81 cents per share.