Cerner (CERN) Down 6.5% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Cerner (CERN). Shares have lost about 6.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Cerner due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Cerner Earnings and Revenues Beat Estimates in Q4

Cerner Corporation (NASDAQ:CERN) reported fourth-quarter 2019 adjusted earnings of 75 cents per share, which beat the Zacks Consensus Estimate of 74 cents by 1.4%. The bottom line also improved from the prior-year quarter figure by 19%.

The company reported revenues of $1.44 billion, which improved 5.6% year over year and outpaced the Zacks Consensus Estimate by 0.6%.

Revenues by Geography

Per management, U.S. revenues grossed $1.28 billion, up 6% from the prior-year quarter.

Non-U.S. revenues increased 3% to $166 million from the year-ago quarter.

Bookings

In the reported quarter, the company’s bookings totaled $1.67 billion, down 15.1% from the year-ago quarter.

Segmental Performance

Licensed software revenues improved 4.8% to $174.5 million, driven by strong growth in SaaS offerings.

Technology resale revenues were $60.4 million, up 31.2% on a year-over-year basis.

Revenues from Subscriptions grossed $92.8 million, up 6.6% year over year.

Professional services’ revenues totaled $509.3 million, up 9.3% from the prior-year quarter number, on the back of solid growth in implementation services.

Revenues at the Managed services unit amounted to $309.4 million, up 3.5% from the prior-year quarter.

Support and maintenance revenues were $273.9 million, down 1% year over year.

Reimbursed travel revenues amounted to $21.9 million, reflecting a year-over-year decrease of 8.9%.

Margins

In the quarter under review, gross profit summed $1.16 billion, up 3.2% year over year. Gross margin was 80.8%, down 180 bps on a year-over-year basis.

General and administrative expenses increased 23.6% to $122.3 million. Further, software development expenses rose 3.7% to $188.2 million.

Adjusted operating margin expanded 160 bps to 20.3% during the reported quarter.

2020 Guidance

For the first quarter of 2020, Cerner expects revenues between $1.42 billion and $1.47 billion. The Zacks Consensus Estimate for revenues stands at $1.43 billion, within management’s guided range.

For the first-quarter 2020 adjusted earnings per share is projected between 69 cents and 71 cents.

New business bookings for first-quarter 2020 are estimated between $1.10 billion and $1.30 billion.

For the full-year 2020, the company anticipates revenues in the range of $5.72-$5.98 billion.

For the full year, adjusted earnings per share are expected between $3.09 and $3.19. The Zacks Consensus Estimate stands at $3.14, lies within the company’s guided range.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

Currently, Cerner has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Cerner has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.