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 lost 2% in a year’s time against the industry’s growth of 1%. Meanwhile, the S&P 500 Index has risen 5.2% in the same timeframe.
The company, with a market capitalization of $21.67 billion, offers healthcare information technology (HCIT) solutions worldwide. It anticipates earnings to improve 12.7% over the next five years. Moreover, the company has a trailing four-quarter positive 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 Favoring the Stock?
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, which supports each department’s efforts to fight COVID-19 via simplified data sharing. This is an important step in Cerner’s continued efforts advocating for and developing open, cognitive platforms to provide true interoperability.
Which Way Are Estimates Headed?
For 2020, the Zacks Consensus Estimate for revenues is pegged at $5.60 billion, indicating a decline of 1.6% from the prior-year period. The same for earnings stands at $2.83 per share, suggesting growth of 5.6% from the year-ago comparable figure.
Stocks to Consider
Some better-ranked stocks from the broader medical space include Quest Diagnostics Incorporated DGX, Laboratory Corporation of America Holdings LH and West Pharmaceutical Services, Inc. WST. While West Pharmaceutical sports a Zacks Rank #1 (Strong Buy), Quest Diagnostics and Laboratory Corporation carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
West Pharmaceutical has a projected long-term earnings growth rate of 9.2%.
Quest Diagnostics has an estimated long-term earnings growth rate of 7.6%.
Laboratory Corporation has an estimated long-term earnings growth rate of 6.1%.
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