Health information systems and services provider Cerner Corporation (NASDAQ: CERN – $55.32) reported revenue and adjusted earnings of $1.34 billion and $0.63 a share for the September quarter. This performance generally aligned well with Street estimates of $1.36 billion and $0.63. Contract bookings for the quarter came in at $1.588 billion, close to the $1.55 billion analysts had estimated. Although the financial report generally met with investors’ expectations, the company’s earnings forecast for the fourth quarter fell short of most previous estimates. Cerner is now looking for $0.64 a share at the midpoint of its forecast range versus the $0.67 a share the Street was expecting. For 2018 the estimate now sits at $2.47 a share. Investors’ reaction to the new forecast was harsh and likely stemmed from the company’s checkered history in meeting expectations.
As a result, CERN shares sold off sharply in the wake of the latest earnings report and forecast. I will continue to hold on to this position for recovery, as the long-term underlying fundamentals are still in place. However, this disappointment sheds some doubt on the company’s credibility with Wall Street to forecast results and it received a number of analyst downgrades.