Cerner Meets Earnings but Misses Revenue Ests


Cerner Corporation (CERN) reported net earnings of $115.3 million or 33 cents per share for the third quarter of the year, meeting the Zacks Consensus Estimate. This reflected a 16.6% rise from $98.9 million and 17.9% from 28 cents in the comparable quarter a year ago.

Revenues in the quarter grew 8% to $727.8 million, but it was below the Zacks Consensus Estimate of $756 million. In fact, the revenue growth was below CERN’s own expectations due to decreased levels of low-margin technology resale.

Segment wise, Support, maintenance and services revenues rose 17.6% to $508.5 million and Reimbursed Travel revenues went up 16.8% to $16.7 million. However, revenues from System sales dipped nearly 12.0% to $202.6 million.

Bookings rose 21% to the all-time third quarter high of $928.0 million. Total backlog increased 24% to $8.4 billion, which comprised of $7.63 billion of contract backlog and $769.8 million of support and maintenance backlog.

Cerner had cash and cash equivalents of $287.5 million as of Sep 28, 2013, down from $317.1 million as of Dec 29, 2012. Total debt rose to $182.9 million as of Sep 28, 2013 compared with $196.1 million as of Dec 29, 2012.

In the first nine months of 2013, cash flow from operating activities rose 5.0% to $554.4 million from $527.8 million in the same period of 2012. Capital expenditure nearly doubled to $218.4 million compared with $130.0 million a year ago.

For the fourth quarter of 2013, Cerner anticipates revenues between $775 and $815 million while earnings are expected between 38 and 39 cents per share. The leading healthcare information technology (“HCIT”) solutions provider also expects new business bookings between $1 and $1.1 billion for the quarter.

We believe long-term investors may consider Cerner, which serves a sizeable installed hospital base that requires composite clinically-oriented applications complying with “meaningful use” needs, reimbursement difficulties and coding challenges. The company has long-standing, integrated and seamless solutions for both inpatient and ambulatory settings. CERN currently retains a Zacks Rank #2 (Buy).

We are also optimistic about Greenway Medical Technologies, Inc. (GWAY), which carries a Zacks Rank #1 (Strong Buy), in the medical information systems industry. Other stocks from the medical products industry that are worth a look include Bio-Rad Laboratories, Inc. (BIO) and INSYS Therapeutics, Inc. (INSY), both with a Zacks Rank #1 (Strong Buy).

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