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Cerner (CERN) Q2 Earnings and Revenues Surpass Estimates

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Cerner Corporation CERN reported second-quarter 2021 adjusted earnings of 80 cents per share, which beat the Zacks Consensus Estimate of 76 cents by 5.3%. The bottom line improved 26.9% from the prior-year quarter.

GAAP EPS in the quarter was 11 cents, down 75% from the prior-year quarter.

Revenue Details

The company reported revenues of $1.46 billion, which surpassed the Zacks Consensus Estimate by 1.3%. The top line increased 9.5% from the year-ago quarter.

Segmental Performance

Licensed software revenues were $175.1 million, which climbed 15.1% from the year-ago quarter.

Technology resale revenues were $56.9 million, up 35% on a year-over-year basis.

Revenues from Subscriptions were $98.4 million, up 6.9% year over year.

Cerner Corporation Price, Consensus and EPS Surprise

Cerner Corporation Price, Consensus and EPS Surprise
Cerner Corporation Price, Consensus and EPS Surprise

Cerner Corporation price-consensus-eps-surprise-chart | Cerner Corporation Quote

Professional services’ revenues totaled $537.1 million, up 16.5% from the prior-year quarter figure.

Revenues at the Managed services unit amounted to $320.8 million, up 4.4% from the prior-year quarter.

Support and maintenance revenues were $259.7 million, down 5.2% year over year.

Reimbursed travel revenues amounted to $8.8 million, reflecting year-over-year increase of 405.9%.

Margins

In the quarter under review, gross profit was $1.19 billion, up 6.9% on a year-over-year basis. Gross margin was 82.1%, down 200 basis points (bps) on a year-over-year basis.

General and administrative expenses increased 16.4% to $156.3 million. Software development expenses rose 35% to $241.6 million.

Operating income totaled $49.6 million, down 66.3% from the prior-year quarter. Operating margin contracted 760 bps on a year-over-year basis to 3.4%.

Financial Position

The company exited the quarter with cash and cash equivalents of $246.4 million, compared with $997.9 million in the previous quarter.

Cumulative net cash from operating activities totaled $819.6 million, compared with $542.1 million in the year-ago period.

Cumulative free cash flow amounted to $453.2 million, compared with $224.4 million.

2021 Guidance

For third-quarter 2021, Cerner anticipates revenues to improve around 6% over third-quarter 2020. The Zacks Consensus Estimate for revenues stands at $1.47 billion.

For third-quarter 2021, adjusted EPS is projected to grow in the range of 12% to 15% over the prior-year quarter. The consensus mark for earnings is pegged at 81 cents.

For full-year 2021, revenues are projected to grow in the mid-single digits. The Zacks Consensus Estimate for revenues stands at $5.80 billion.

Adjusted EPS is expected to be more than $3.25 (up from the previous guidance of above $3.20). The consensus mark for earnings is pegged at $3.21.

Wrapping Up

Cerner exited the second quarter on a strong note, wherein both earnings and revenues beat the Zacks Consensus Estimate. Gains in six of the company’s business units buoy optimism. Apart from this, the company repurchased shares worth $400 million in the quarter under review.

Per management, the robust performance reflected the company’s strong progress in its transformation initiatives and a strong market presence.

The company saw a decrease in revenues in Support and maintenance segment. Contraction in both gross and operating margins is a headwind. Further, competition in the global MedTech space remains a concern.

Zacks Rank

Currently, Cerner carries a Zacks Rank #3 (Hold).

Earnings of Other MedTech Majors at a Glance

Some better-ranked stocks in the broader medical space that have already announced their quarterly results are Boston Scientific Corporation BSX, West Pharmaceutical Services, Inc. WST and Laboratory Corporation of America Holdings LH, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Boston Scientific reported second-quarter 2021 adjusted EPS of 40 cents, which beat the Zacks Consensus Estimate by 8.1%. Second-quarter revenues of $3.08 billion outpaced the consensus mark by 4.4%.

West Pharmaceutical reported second-quarter 2021 adjusted EPS of $2.46, which surpassed the Zacks Consensus Estimate by 41.4%. Second-quarter revenues of $723.6 million outpaced the Zacks Consensus Estimate by 8.7%.

LabCorp reported second-quarter 2021 adjusted EPS of $6.13, surpassing the Zacks Consensus Estimate by 8.7%. Revenues of $3.84 billion exceeded the Zacks Consensus Estimate by 6.9%.


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