Cerner (CERN) Misses Earnings & Revenue Estimates In Q2

Cerner Corp (NASDAQ:CERN) reported adjusted second-quarter 2017 earnings of 56 cents per share, missing the Zacks Consensus Estimate by a penny. Notably, earnings improved 5.7% from the year-ago quarter.

The company reported net revenues of $1.292 billion, falling short of the Zacks Consensus Estimate of $1.3 billion. However, revenues rose 6.3% on a year-over-year basis. Cerner holds a Zacks Rank #2 (Buy).

Quarter Highlights

Bookings Update: Bookings in the second quarter of 2017 were $1.636 billion (an all-time high), up 16% on a year-over-year basis.

Revenue Cycle has been a strong contributor to the company’s results, courtesy of strong sales and solid contribution from RevWorks services (revenue management services). Population Health service businesses also drove revenues in the second quarter on solid growth in the company’s flagship HealtheIntent solutions. The company also posted an impressive performance in the ambulatory and small hospital market.

Segment Details: System sales increased 4.4% to $347.8 million. Solid sales were buoyed by licensed software and subscriptions, partially offset by a decline in technology resale.

Total services revenues, including professional and managed services, rose 9% from the year-ago quarter to $917.4 million. This reflects solid execution by the company’s service organizations.

Support and maintenance revenues increased 1% in the quarter, slightly below the company’s full-year expected growth rate. Cerner expects growth in the band 3% to 4% at the segment for the rest of the year.

Geographically, domestic revenues increased 8% from the year-ago quarter to $1.16 billion, while non-U.S. revenues fell 5% to $136 million.

Cerner Corporation Price, Consensus and EPS Surprise

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

Margin Details: Gross margin in the second quarter was 82.7% of revenues, down 40 basis points (bps) from a year ago. The decline was due to the lower mix of sublicensed software and lackluster performance by Cerner’s technology resale business.

Adjusted operating margin in the second quarter was 23% of net sales, down 80 bps from a year ago.

Balance Sheet

Cerner ended the second quarter of 2017 with $748 million in total cash and investments.

Total debt for Cerner, including capital lease obligations, was $543 million.

Guidance

For the third quarter, Cerner forecasts revenues between $1.265 billion and $1.325 billion. Adjusted earnings are expected in the band of 61 cents to 63 cents per share.

For the full year, management expects revenues between $5.150 billion and $5.250 billion, compared to the previous guidance of $5.100 billion to $5.300 billion. Cerner currently forecasts 2017 adjusted earnings in the band of $2.46 and $2.54, compared to the previously estimated range of $2.44 and $2.56.

Key Picks

A few other top-ranked stocks in the broader medical sector are Edwards Lifesciences Corporation (NYSE:EW) , CryoLife, Inc. (NYSE:CRY) and Fresenius Medical Care Corporation (NYSE:FMS) . Notably, Fresenius Medical Care sports a Zacks Rank #1 (Strong Buy), while Edwards Lifesciences and CryoLife have a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Fresenius Medical Care represents an impressive return of 3.5% over the last one year. The company delivered a solid earnings surprise of 20.5% in the last reported quarter.

Edwards Lifesciences has a long-term expected earnings growth rate of 15.2%. Notably, the stock has a one-year return of 3%.

CryoLife yielded a strong return of 28.4% over the last one year. The stock delivered a positive earnings surprise of 20% in the last reported quarter.

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