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Cerner (CERN) Q3 Earnings Surpass Estimates, Revenues Miss

Zacks Equity Research
·5 min read

Cerner Corporation CERN reported third-quarter 2020 adjusted earnings of 72 cents per share, which beat the Zacks Consensus Estimate of 71 cents by 1.4%. Moreover, the bottom line improved 9.1% from the prior-year quarter.

The company reported revenues of $1.37 billion, which missed the Zacks Consensus Estimate by 0.3%. Moreover, the top line declined 4.2% from the year-ago quarter.

Revenues by Geography

Per management, U.S. revenues grossed $1.23 billion, down 3% from the prior-year quarter.

Non-U.S. revenues fell 16% to $138 million from the year-ago quarter primarily due to the divestiture of assets in Germany and Spain.

Bookings

In the reported quarter, the company’s bookings totaled $1.47 billion, down 10.9% from the year-ago quarter. However, the metric came in above the mid-point of the company’s guided range.

Segmental Performance

Licensed software revenues rose 11.1% to $171.7 million, courtesy of strong growth in SaaS offerings.

Technology resale revenues were $47.1 million, down 32.9% on a year-over-year basis.

Revenues from Subscriptions were $93.4 million, up 1.6% year over year.
Professional services’ revenues totaled $479.9 million, down 5.4% from the prior-year quarter number. The downside can be attributed to impact of divestitures in the third quarter, lower third-party services, and the termination of the large RevWorks agreement.

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

Revenues at the Managed services unit amounted to $311.8 million, up 3.1% from the prior-year quarter.

Support and maintenance revenues were $259.9 million, down 6.2% year over year.

Reimbursed travel revenues amounted to $4.7 million, reflecting year-over-year decline of 81.4% as a result of the ongoing pandemic-led travel restrictions.

Margins

In the quarter under review, gross profit was $1.14 billion, down 1.8% year over year. Gross margin was 83.1%, up 220 basis points (bps) on a year-over-year basis.

General and administrative expenses decreased 23.3% to $116.8 million. Further, software development expenses fell 0.4% to $186.8 million.

Adjusted operating income totaled $278.7 million, up 7.8% from the prior-year quarter. Adjusted operating margin expanded 230 bps to 20.4% during the reported quarter.

Q4 Guidance

For fourth-quarter 2020, Cerner anticipates revenues between $1.37 billion and $1.42 billion. The Zacks Consensus Estimate for revenues stands at $1.39 billion.

For fourth-quarter 2020 adjusted earnings per share is projected between 76 cents and 80 cents. The consensus mark for earnings is pegged at 78 cents.

New business bookings for fourth-quarter 2020 are estimated between $1.55 billion and $1.75 billion.

Wrapping Up

Cerner exited the third quarter on a mixed note. The company continues to witness strong contributions from key areas like Population Health, Revenue Cycle and IT Works. Further, gains in Licensed software, Subscriptions and Managed Services units buoy optimism. Margin expansion is also a positive.

The company benefited from electronic health record (EHR), electronic patient record (EPR) or electronic medical record (EMR) platforms that provide patient care in acute inpatient and outpatient settings.

Meanwhile, bookings witnessed a noticeable decline in the quarter under review. The company also saw a decrease in revenues across Technology resale, Professional services and Reimbursed travel segments. Moreover, international revenues witnessed a fall in the quarter under review. Further, competition in the global MedTech space remains a concern.

Zacks Rank

Currently, Cerner carries a Zacks Rank #4 (Sell).

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 Thermo Fisher Scientific Inc. TMO, Align Technology, Inc. ALGN and AngioDynamics, Inc. ANGO, each carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Thermo Fisher reported third-quarter 2020 adjusted EPS of $5.63, beating the Zacks Consensus Estimate by 28.8%. Revenues of $8.52 billion surpassed the consensus mark by 10%.

Align Technology reported third-quarter 2020 adjusted EPS of $2.25, which surpassed the Zacks Consensus Estimate by 281.4%. Revenues of $734.1 million outpaced the consensus mark by 38%.

AngioDynamics reported first-quarter fiscal 2021 adjusted earnings per share (EPS) of 2 cents against the Zacks Consensus Estimate of a loss per share of 6 cents. Revenues of $70.2 million beat the consensus mark by 6.9%.

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AngioDynamics, Inc. (ANGO) : Free Stock Analysis Report
 
Cerner Corporation (CERN) : Free Stock Analysis Report
 
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