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Cerner Bests Earning’s Expectations; Third Quarter Profit Guidance Lags

Health information systems provider Cerner Corp. (NASDAQ – CERN – $72.21) reported adjusted earnings per share rose to $0.66 in the second period from $0.62 a year earlier, ahead of analysts’ estimates of $0.64. Revenue grew 5% to $1.43 billion from $1.37 billion a year ago, broadly in-line with  Street views. Bookings were at the high-end of its own expectations at $1.44 billion. For the third quarter, the company expects revenue between $1.405 billion and $1.455 billion, and adjusted earnings between $0.65 and $0.67 per share, compared with estimates of $0.68 and revenue of $1.43 billion. It sees new business bookings of between $1.5 billion and $1.7 billion in the third quarter on a current backlog of $14.98 billion.

       North Kansas City-based Cerner reaffirmed revenue guidance for the full-year 2019 at between $5.65 billion and $5.85 billion, and adjusted earnings per share at $2.64 to $2.72, against the Street views of $2.67 on revenue of $5.74 billion. Operational improvements and share buybacks should lift earnings through 2020. Nonetheless, Cerner’s markets have generally matured and are being challenged via the move to value-based care, suggesting it will also need to address revenue growth, if the stock’s current market valuation of 27 times forward estimates is to be sustained over time. The company initiated its first dividend to be paid in September at an annual rate of $0.72. The shares, up about 18% over the past 52-weeks, can be considered as hedge fund Starboard Value continues to seek operational improvements and board representation at the company.

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