Feb. 25--Lower spending by big hospitals on technology upgrades caused Computer Task Group's fourth-quarter profits to tumble by 24 percent and fall short of analyst forecasts.
The Buffalo-based information technology company also warned that its sales and profits this year won't rise as quickly as analysts had been expecting as healthcare providers remain cautious about spending on technology improvements in the wake of lower Medicare reimbursements.
"We expect first-quarter results to lag the rest of the year as spending from healthcare providers remains muted," said James Boldt, CTG's chairman and chief executive officer. "We do expect spending to pick up modestly later in the year as large hospitals make the financial adjustments to fund the necessary information technology investments."
While much of the drop in profits during the fourth quarter was due to a one-time gain during 2012 from insurance proceeds, the company's earnings from its operations still weakened by about 8 percent as CTG's revenues slipped by 5 percent.
Boldt blamed the drop in revenues on decisions by big hospitals to reduce their spending on electronic medical records upgrades and other technology investments after being hit with a 2 percent reduction in their Medicare reimbursements because of the federal budget sequestration last fall.
CTG's profits fell to $3.7 million, or 22 cents per share, from $4.9 million, or 29 cents per share, a year ago, when the company's earnings were bolstered by $845,000, or 5 cents per share, from the proceeds from a life insurance policy. Excluding the insurance gain, CTG's profits from its operations fell by 8 percent. CTG's earnings were a penny less than analysts were expecting.
Because CTG expects spending by hospitals to remain tight, the company said it expects its earnings this year to be flat to slightly higher, ranging between 90 cents and $1 per share, compared with 92 cents per share during 2013. That's less than the $1.06 per share that analysts were forecasting.
The company said it expects its revenues to be roughly flat this year at between $410 million and $420 million, compared with $419 million last year.
"We look for revenue and earnings to gain momentum as the year progresses," Boldt said.
The company also increased its quarterly dividend by 20 percent, or a penny per share, to 6 cents per share.
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