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Will Higher System Sales Drive Cerner's (CERN) Q4 Earnings?
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Cerner Corporation is set to report fourth-quarter fiscal 2017 results on Feb 6, after market closes. In the previous quarter, the company reported earnings of 61 cents per share, missing the Zacks Consensus Estimate by a penny. However, earnings rose 3.4% on a year-over-year basis.
On an average, the company delivered a positive earnings surprise of 0.03% in the trailing four quarters. Over the last year, the stock’s price performance has been in line with the industry’s rally of 29.6%.
The company is expected to show steady growth in system sales — one of the major revenue components. While this is expected to drive fourth-quarter results, an expected improvement in revenues in other segments will help the company generate solid results.
The Zacks Consensus Estimate for System Sales revenues is pegged at $357 million, up 10.2% from the third quarter. With growth in Cerner’s licensed software and subscriptions, Cerner is expected to witness strong performance in the segment.
Let’s see how things are shaping up prior to this announcement.
Factors at Play
View Upbeat: For the fourth quarter, Cerner forecasts revenues between $1.3 billion and $1.35 billion, with the midpoint reflecting growth of 5% on a year-over-year basis. Adjusted earnings are expected in the range of 60-62 cents per share, midpoint of which is flat on a year-over-year basis.
The Zacks Consensus Estimate for revenues is pegged at $1.33 billion, reflecting growth of 5.5%, while the same for adjusted earnings per share is pegged at 61 cents. Solid participation in the EHR placement market has lent Cerner a competitive edge in the global space. The company offers an exposure to worldwide healthcare automation.
Growth in Support, Maintenance & Services: The Zacks Consensus Estimate for Support, Maintenance and Services segment revenues in the fourth-quarter is pegged at $943 million, up 1.6% from the third quarter. The segment also experienced year-over-year increase of 7.8% in third-quarter 2017.
Bookings Growth: Cerner expects bookings in the range of $1.75-$2 billion in the fourth quarter, with the midpoint reflecting 30% growth on a year-over-year basis. Moreover, the Zacks Consensus Estimate for bookings in the fourth quarter is pegged at $1.742 billion, reflecting 56.8% growth from the third quarter. However, bookings fell 29% in the previous quarter on a year-over-year basis.
Solid Geographical Revenues: Cerner has been witnessing solid non-U.S. bookings performance in Canada, Australia, France, Germany and Middle East lately. In the recent past, Cerner was selected as a supplier of choice in Skane, Sweden, where it will provide core solutions to 10 hospitals and 190 primary care locations.
This indicates that the company has gained major international foothold outside the United States.
Strong Financial Foothold: The company exited the last quarter with a strong operating cash flow of $363 million and an all-time high free cash flow of $223 million.
Competition Rife: The market for HCIT solutions, devices and services is intensely competitive and subject to rapid technological changes. Fierce competition with reputed names such as Allscripts Healthcare Solutions, GE Healthcare Technologies and McKesson is likely to put pressure on pricing and margins.
Core Incompetency: In the last quarter, several major deals did not materialize, which led to a fall in bookings. Additionally, low margin services and technology resale are likely to affect Cerner’s gross margin adversely in the fourth quarter.
Earnings Whispers
Our proven model does not conclusively indicate an earnings beat for Cerner in this quarter. This is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Cerner has an earnings ESP of -0.88%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Cerner carries a Zacks Rank #3. A favorable Zacks Rank increases the predictive power of ESP. However, a negative ESP makes surprise prediction difficult.
Stocks Worth a Look
Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.
Anthera Pharmaceuticals (ANTH - Free Report) has an Earnings ESP of +20.47% and a Zacks Rank #2.
Fibrocell Science has an Earnings ESP of +2.22% and a Zacks Rank #2.
Zacks Top 10 Stocks for 2018
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2018?
Last year's 2017 Zacks Top 10 Stocks portfolio produced double-digit winners, including FMC Corp. and VMware which racked up stellar gains of +67.9% and +61%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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Will Higher System Sales Drive Cerner's (CERN) Q4 Earnings?
Cerner Corporation is set to report fourth-quarter fiscal 2017 results on Feb 6, after market closes. In the previous quarter, the company reported earnings of 61 cents per share, missing the Zacks Consensus Estimate by a penny. However, earnings rose 3.4% on a year-over-year basis.
On an average, the company delivered a positive earnings surprise of 0.03% in the trailing four quarters. Over the last year, the stock’s price performance has been in line with the industry’s rally of 29.6%.
The company is expected to show steady growth in system sales — one of the major revenue components. While this is expected to drive fourth-quarter results, an expected improvement in revenues in other segments will help the company generate solid results.
Cerner Corporation Price and Consensus
Cerner Corporation Price and Consensus | Cerner Corporation Quote
The Zacks Consensus Estimate for System Sales revenues is pegged at $357 million, up 10.2% from the third quarter. With growth in Cerner’s licensed software and subscriptions, Cerner is expected to witness strong performance in the segment.
Let’s see how things are shaping up prior to this announcement.
Factors at Play
View Upbeat: For the fourth quarter, Cerner forecasts revenues between $1.3 billion and $1.35 billion, with the midpoint reflecting growth of 5% on a year-over-year basis. Adjusted earnings are expected in the range of 60-62 cents per share, midpoint of which is flat on a year-over-year basis.
The Zacks Consensus Estimate for revenues is pegged at $1.33 billion, reflecting growth of 5.5%, while the same for adjusted earnings per share is pegged at 61 cents. Solid participation in the EHR placement market has lent Cerner a competitive edge in the global space. The company offers an exposure to worldwide healthcare automation.
Growth in Support, Maintenance & Services: The Zacks Consensus Estimate for Support, Maintenance and Services segment revenues in the fourth-quarter is pegged at $943 million, up 1.6% from the third quarter. The segment also experienced year-over-year increase of 7.8% in third-quarter 2017.
Bookings Growth: Cerner expects bookings in the range of $1.75-$2 billion in the fourth quarter, with the midpoint reflecting 30% growth on a year-over-year basis. Moreover, the Zacks Consensus Estimate for bookings in the fourth quarter is pegged at $1.742 billion, reflecting 56.8% growth from the third quarter. However, bookings fell 29% in the previous quarter on a year-over-year basis.
Solid Geographical Revenues: Cerner has been witnessing solid non-U.S. bookings performance in Canada, Australia, France, Germany and Middle East lately. In the recent past, Cerner was selected as a supplier of choice in Skane, Sweden, where it will provide core solutions to 10 hospitals and 190 primary care locations.
This indicates that the company has gained major international foothold outside the United States.
Strong Financial Foothold: The company exited the last quarter with a strong operating cash flow of $363 million and an all-time high free cash flow of $223 million.
Competition Rife: The market for HCIT solutions, devices and services is intensely competitive and subject to rapid technological changes. Fierce competition with reputed names such as Allscripts Healthcare Solutions, GE Healthcare Technologies and McKesson is likely to put pressure on pricing and margins.
Core Incompetency: In the last quarter, several major deals did not materialize, which led to a fall in bookings. Additionally, low margin services and technology resale are likely to affect Cerner’s gross margin adversely in the fourth quarter.
Earnings Whispers
Our proven model does not conclusively indicate an earnings beat for Cerner in this quarter. This is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Cerner has an earnings ESP of -0.88%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Cerner carries a Zacks Rank #3. A favorable Zacks Rank increases the predictive power of ESP. However, a negative ESP makes surprise prediction difficult.
Stocks Worth a Look
Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.
Amphastar Pharmaceuticals (AMPH - Free Report) has an Earnings ESP of +194.12% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank Stocks Here.
Anthera Pharmaceuticals (ANTH - Free Report) has an Earnings ESP of +20.47% and a Zacks Rank #2.
Fibrocell Science has an Earnings ESP of +2.22% and a Zacks Rank #2.
Zacks Top 10 Stocks for 2018
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2018?
Last year's 2017 Zacks Top 10 Stocks portfolio produced double-digit winners, including FMC Corp. and VMware which racked up stellar gains of +67.9% and +61%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2018 today >>