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Here's Why You Should Hold on to Cerner (CERN) Stock Now

Zacks Equity Research
·3 min read

Cerner Corporation CERN is well poised for growth on the back of big data-based electronic health records (EHR) system and strategic deals. However, stiff competition remains a concern.

Shares of Cerner have gained 2.8% in a year’s time compared with the industry’s growth of 22%. Meanwhile, the S&P 500 Index has rallied 16.7% in the same timeframe.

The company, with a market capitalization of $22.42 billion, offers healthcare information technology (HCIT) solutions worldwide. It anticipates earnings to improve 11.9% over the next five years. Moreover, the company has a trailing four-quarter earnings surprise of 3%, on average.

Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).

What’s Deterring the Stock?

Stiff competition in the Healthcare Information Technology (HCIT) market remains a headwind. The intensity of competition might weigh on both pricing and margins.

What’s Driving Growth?

Cerner has been benefiting from the prospects of the EHR services in the U.S. MedTech space. Notably, Cerner's HealtheIntent is a big data platform, which provides it with significant exposure to AI trends in the medical world. Per management, the company’s prospects of expanding presence of EHR-agnostic CareAware and HealtheIntent solutions beyond EHR base are substantial.

The company has strengthened presence in the HCIT space through both organic and inorganic means. Further, it plans on collaborating with leading companies and academic institutions to provide a broader portfolio of EHR solutions.

In fact, during first-quarter 2020, the company inked a deal with the U.S. Department of Defense (DoD) and Veterans Affairs (VA) organizations with regard to a go-live of a joint health information exchange that supports each department’s efforts to fight COVID-19 via simplified data sharing. This is a significant step in Cerner’s continued efforts advocating for development of open, cognitive platforms to provide true interoperability.

Also, in January 2020, Cerner entered into collaboration with CoverMyMeds. Per the deal, Cerner will integrate patient-specific information into the EHR.

Which Way Are Estimates Headed?

For 2020, the Zacks Consensus Estimate for revenues is pegged at $5.48 billion, indicating a decline of 3.7% from the prior-year quarter. The same for earnings stands at $2.84 per share, suggesting growth of 5.9% from the year-ago reported figure.

Stocks to Consider

Some better-ranked stocks from the broader medical space include West Pharmaceutical Services, Inc. WST, Thermo Fisher Scientific Inc. TMO and PerkinElmer, Inc. PKI. While both PerkinElmer and West Pharmaceutical sport a Zacks Rank #1 (Strong Buy), Thermo Fisher carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PerkinElmer has a projected long-term earnings growth rate of 17.4%.

West Pharmaceutical has a projected long-term earnings growth rate of 17.4%.

Thermo Fisher has an estimated long-term earnings growth rate of 15%.

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Cerner Corporation (CERN) : Free Stock Analysis Report
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