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Cerner (CERN) to Report Q4 Earnings: What's in the Cards?

Zacks Equity Research

Cerner Corporation’s CERN fourth-quarter 2018 results are scheduled to release on Feb 5. The company is likely to see a soft quarter due to decline in bookings revenues. However, an upbeat guidance for the to-be-reported quarter instils optimism.

Q3 Results

In the last reported quarter, Cerner’s adjusted earnings came in at 63 cents per share in line with the Zacks Consensus Estimate. The metric also improved from the prior-year quarter’s figure by 2 cents.

Meanwhile, revenues rose 5% on a year-over-year basis to $1.34 billion, which missed the Zacks Consensus Estimate of $1.36 billion.

Which Way Are Q4 Estimates Treading?

The Zacks Consensus Estimate for fourth-quarter earnings is pegged at 63 cents, reflecting growth 8.6% year over year. The same for revenues is pinned at $1.39 billion, mirroring year-over-year growth of 6.1%.

Let’s delve deeper.

Cerner Corporation Price and EPS Surprise


Cerner Corporation Price and EPS Surprise | Cerner Corporation Quote

Bookings to Decline in Q4

Management at Cerner expects bookings revenues between $1.85 billion and $2.05 billion in the fourth quarter. The midpoint of this range reflects a 16% decrease compared to the company’s record high bookings of $2.33 billion in the fourth quarter of 2017. The Zacks Consensus Estimate for fourth-quarter bookings is pegged at $2.07 billion, indicating a year-over-year decline of 11%. Notably, softness in bookings might mar the company’s revenue growth.

However, strong contributions from large hospitals, community hospitals, and ambulatory venues are likely to aid bookings. For 2018, bookings are expected to be around $6.71 billion, up 6% year over year. Not to forget, Cerner’s bookings totaled $1.59 billion, up 42.9% year over year in the third quarter.

Other Factors at Play

Q4 Guidance

For the fourth quarter of 2018, Cerner expects revenues between $1.37 billion and $1.42 billion. The midpoint of this range reflects 6% year-over-year growth. Adjusted earnings per share are expected in the band of 62-64 cents. The midpoint of this range is 9% higher than the year-ago quarter.

Reimbursed Travel

Cerner’s Reimbursed Travel is likely to be a key catalyst behind the company’s top-line growth in the quarter to be reported.                                                   

For the fourth quarter, the Zacks Consensus Estimate for Reimbursed Travel stands at $28.6 million, up 1.5% year over year.

What Does Our Model Say?

Our proven model clearly indicates that a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to deliver a positive earnings surprise. This is not the case here.

Earnings ESP: Cerner has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Cerner carries a Zacks Rank #3.

Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks Worth a Look

Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat in the upcoming releases:

PerkinElmer, Inc. PKI has an Earnings ESP of +0.77% and a Zacks Rank #3.

Illumina, Inc. ILMN has an Earnings ESP of +0.02% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

DexCom DXCM has an Earnings ESP of +8.93% and a Zacks Rank #2.

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