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Cerner Announces Share Buyback and New Organizational Structure

Shares of healthcare information services provider Cerner Corp. (NASDAQ: CERN – $63.20)  are moving higher by about 10% following its announcement that the company has added four new directors to its board; committed to improving its adjusted operating margin over the next two years; and increased its authorization to repurchase outstanding stock to $1.5 billion. Specifically, subsequent to Cerner’s annual meeting to be held on May 30th, the board of directors will consist of 10 members, nine of which will be independent. In terms of adjusted operating margins, the company is now targeting margins of 20.0% and 22.5% by the fourth quarters of 2019 and 2020, respectively, notably better than the 19.0% and 19.5% forecast previously. Meanwhile, the $1.5 billion in share repurchases should be completed within the next 12 months, adding further upside to earnings. In addition to the above announcement, Cerner is in the process of streamlining its organization to better meet the demand and opportunity in its targeted market.

       Shares of CERN, which have not fared particularly well since being added to the aggressive portfolio, remain well positioned to continue prospering in the healthcare information services business, with earnings growth likely to continue exceeding the advance of the top line over the longer term. And a newly established dividend beginning in September, adds to the stock’s appeal.

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