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Cerner Hurt by Low System Sales and Intense Competition
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On Jan 3, we issued an updated research report on North Kansas City, MO-based Cerner Corporation – a leading global provider of healthcare information technology solutions (HCIT). The stock currently carries a Zacks Rank #4 (Sell).
Cerner’s share price movement in the past three months was unsatisfactory. The company registered a loss of 22.66%, wider than the Zacks categorized Medical info-systems sub-industry’s loss of 19.66%. Over the last one year, Cerner lost 18.44%. Furthermore, the estimate revision trend for the current fiscal year remains unfavorable with 2 estimates moving downward over the last two months. The company’s current estimate has slipped by a penny over the past two months, pointing to concerns ahead. Notably, the stock recorded a negative earnings surprise of almost 1.8% in the last reported quarter.
On this note, Cerner ended third-quarter 2016 on a dismal note, missing the Zacks Consensus Estimate for both the top and the bottom line. Also, the lowered revenue guidance for 2016, owing to reduced hardware revenues, is a dampener.
In the quarter, while System sales decreased 7.3% on a year-over-year basis there was a 21% decline in technology resale and a 12% drop in licensed software. All these are likely to mar the prospects for Cerner.
Coming to the HCIT space, lately the niche market has been gaining prominence, courtesy of latest technologies like EMR (Electronic Medical Record) and Electronic Health Record (EHR).
Cerner, a major player in this space, has been facing cut-throat competition from reputed names such as Allscripts Healthcare Solutions, Epic Systems, GE Healthcare Technologies, McKesson Corp and Quality Systems among others. This has impacted the company’s pricing and margins to a great extent. Stringent hospital budgets exert further pressure on pricing.
As a result, Cerner’s projected sales growth is now 8.65%, much lower than the industry average of 18.5%.
However, we are upbeat about Cerner’s Revenue Cycle management and Population Health platforms. The platforms posted strong results in the quarter, courtesy of solid sales, inclusion in new EHR deals and solid contribution from RevWorks services (revenue management services).
Additionally, a long-term expected earnings growth rate of 14.7% instills some confidence among investors.
Addus HomeCare has a long-term expected earnings growth rate of approximately 15%. Notably, the stock represents an impressive one-year return of 53.1%.
Cogentix Medical has posted a positive earnings surprise of 100% in the last reported quarter. Additionally, the company posted a promising one-year return of almost 74.2%.
Penumbra has a long-term expected earnings growth rate of approximately 20%. Notably, the stock represents an impressive one-year return of 16.4%.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>
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Cerner Hurt by Low System Sales and Intense Competition
On Jan 3, we issued an updated research report on North Kansas City, MO-based Cerner Corporation – a leading global provider of healthcare information technology solutions (HCIT). The stock currently carries a Zacks Rank #4 (Sell).
Cerner’s share price movement in the past three months was unsatisfactory. The company registered a loss of 22.66%, wider than the Zacks categorized Medical info-systems sub-industry’s loss of 19.66%. Over the last one year, Cerner lost 18.44%. Furthermore, the estimate revision trend for the current fiscal year remains unfavorable with 2 estimates moving downward over the last two months. The company’s current estimate has slipped by a penny over the past two months, pointing to concerns ahead.
Notably, the stock recorded a negative earnings surprise of almost 1.8% in the last reported quarter.
On this note, Cerner ended third-quarter 2016 on a dismal note, missing the Zacks Consensus Estimate for both the top and the bottom line. Also, the lowered revenue guidance for 2016, owing to reduced hardware revenues, is a dampener.
In the quarter, while System sales decreased 7.3% on a year-over-year basis there was a 21% decline in technology resale and a 12% drop in licensed software. All these are likely to mar the prospects for Cerner.
Coming to the HCIT space, lately the niche market has been gaining prominence, courtesy of latest technologies like EMR (Electronic Medical Record) and Electronic Health Record (EHR).
Cerner, a major player in this space, has been facing cut-throat competition from reputed names such as Allscripts Healthcare Solutions, Epic Systems, GE Healthcare Technologies, McKesson Corp and Quality Systems among others. This has impacted the company’s pricing and margins to a great extent. Stringent hospital budgets exert further pressure on pricing.
As a result, Cerner’s projected sales growth is now 8.65%, much lower than the industry average of 18.5%.
However, we are upbeat about Cerner’s Revenue Cycle management and Population Health platforms. The platforms posted strong results in the quarter, courtesy of solid sales, inclusion in new EHR deals and solid contribution from RevWorks services (revenue management services).
Additionally, a long-term expected earnings growth rate of 14.7% instills some confidence among investors.
Key Picks
Better-ranked stocks in the broader medical sector include Addus HomeCare Corporation (ADUS - Free Report) , Cogentix Medical, Inc. (CGNT - Free Report) and Penumbra Inc. (PEN - Free Report) . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Addus HomeCare has a long-term expected earnings growth rate of approximately 15%. Notably, the stock represents an impressive one-year return of 53.1%.
Cogentix Medical has posted a positive earnings surprise of 100% in the last reported quarter. Additionally, the company posted a promising one-year return of almost 74.2%.
Penumbra has a long-term expected earnings growth rate of approximately 20%. Notably, the stock represents an impressive one-year return of 16.4%.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>