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Cerner Corporation reported adjusted first-quarter 2018 earnings of 58 cents per share, down 1.7% from the year-ago quarter. The figure was in line with the Zacks Consensus Estimate.
Revenues of $1.29 billion rose 2.6% year over year but missed the Zacks Consensus Estimate of $1.34 billion.
The stock has a Zacks Rank #3 (Hold). Cerner underperformed its industry in a year’s time. The stock has lost 9.7% compared with the industry’s return of 3.2%.
Bookings Detail
The year-over-year upside in revenues can be primarily attributed to an increase in bookings in the first quarter.
Bookings were $1.40 billion, up 12% on a year-over-year basis. The company registered strong bookings on business office services. However, subscription bookings were lower than expected.
Instead of reporting in three revenue categories — system sales, support maintenance and services — Cerner reported in six segments in the first quarter.
Licensed software in the first quarter fell 5.3% to $134.8 million, on a year-over-year basis. Lower-than expected subscription bookings marred growth in the segment.
Subscriptions accounted for revenues worth $76.6 million, down 32.4% on a year-over-year basis.
Professional services increased 11.3% year over year to $441.3 million. Per management, strong performance in the segment is likely to enhance revenue cycle position.
Managed services segment revenues were $268.3 million, up 3.3% year over year.
Support and maintenance revenues were $284.6 million, up 8.6% year over year.
Reimbursed Travel sales amounted to $23.9 million, up 6% from the year-ago quarter.
Margins
Gross margin in the first quarter was 82.1%, almost flat year over year.
Operating margin for the reported quarter was 15.1%, which contracted 427 basis points (bps) on a year-over-year basis.
The downside was caused by surge in operating expenses, which rose 6% year over year. The growth was driven by personnel expense related to revenue-generating associates and non-cash items.
Financial Position
Cerner exited the first quarter with free cash flow of $255.7 million. Operating cash flow totaled $409 million.
Long-term debt, including capital lease obligations, was $527 million, down slightly on a sequential basis.
View Downbeat
Cerner expects second-quarter 2018 revenues between $1.31 billion and $1.36 billion. The Zacks Consensus Estimate of $1.38 billion for the same, is higher than the projected range.
The second quarter of 2018 adjusted earnings per share is projected in the range of 59-61 cents. The range is lower than the Zacks Consensus Estimate of 66 cents.
For 2018, revenues are projected in the range of $5.33-$5.45 billion, down from a range of $5.45 billion to $5.65 billion. The Zacks Consensus Estimate of $ 5.54 billion for the same, is significantly higher than the projection.
Full-year 2018 adjusted earnings per share is estimated in the range of $2.45-$2.55, which lags the Zacks Consensus Estimate of $2.64.
Further. the company expects second-quarter 2018 new business bookings in the range of $1.35-$1.55 billion.
In Conclusion
Cerner exited the first quarter on a tepid note, missing the consensus mark on the top-line front. Revenues came below expectations due to software issues, technology resale, lesser-than-expected subscription bookings and the delay of the VA contract. A downbeat guidance indicates concerns for the stock. Further, lower margins on technology resale, resulting from higher mix of device resale is a concern. Additionally, Cerner has been facing macroeconomic challenges along with cutthroat competition in niche space. Surging operating expenses also add to the woes.
International growth is likely to boost with the company’s prospects in Australia, Canada, Middle East, U.K., Ireland and Germany. Cerner witnessed strong cash flow and record bookings. We believe that the company has growth opportunities in the revenue cycle management (RCM), Population Health and ambulatory markets based on its product strength and enviable track record of adding new clients. Solid growth in the HealtheIntent platform also holds promise. Further, the company recently reported a suite of developments in its EHR platform.
Q1 Earnings of MedTech Majors at a Glance
A few better-ranked stocks in the broader medical space which reported solid earnings this season are Baxter International Inc. (BAX - Free Report) , Varian Medical Systems, Inc. and Intuitive Surgical, Inc. (ISRG - Free Report) .
Intuitive Surgical reported adjusted earnings of $2.44 per share, which surpassed the Zacks Consensus Estimate by 22.6%. Revenues totaled $848 million, which beat the Zacks Consensus Estimate by 10.6%.
Varian reported second-quarter fiscal 2018 adjusted earnings of $1.15 per share, which beat the Zacks Consensus Estimate of $1.06. Adjusted earnings improved 27.8% on a year-over-year basis.
Baxter reported first-quarter 2018 adjusted earnings per share of 70 cents, which beat the Zacks Consensus Estimate by 12.9% and improved from the year-ago quarter’s figure of 58 cents.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Image: Bigstock
Cerner (CERN) Meets Q1 Earnings Estimates, Lowers '18 View
Cerner Corporation reported adjusted first-quarter 2018 earnings of 58 cents per share, down 1.7% from the year-ago quarter. The figure was in line with the Zacks Consensus Estimate.
Revenues of $1.29 billion rose 2.6% year over year but missed the Zacks Consensus Estimate of $1.34 billion.
The stock has a Zacks Rank #3 (Hold). Cerner underperformed its industry in a year’s time. The stock has lost 9.7% compared with the industry’s return of 3.2%.
Bookings Detail
The year-over-year upside in revenues can be primarily attributed to an increase in bookings in the first quarter.
Bookings were $1.40 billion, up 12% on a year-over-year basis. The company registered strong bookings on business office services. However, subscription bookings were lower than expected.
Cerner Corporation Price and Consensus
Cerner Corporation Price and Consensus | Cerner Corporation Quote
Segment Details
Instead of reporting in three revenue categories — system sales, support maintenance and services — Cerner reported in six segments in the first quarter.
Licensed software in the first quarter fell 5.3% to $134.8 million, on a year-over-year basis. Lower-than expected subscription bookings marred growth in the segment.
Subscriptions accounted for revenues worth $76.6 million, down 32.4% on a year-over-year basis.
Professional services increased 11.3% year over year to $441.3 million. Per management, strong performance in the segment is likely to enhance revenue cycle position.
Managed services segment revenues were $268.3 million, up 3.3% year over year.
Support and maintenance revenues were $284.6 million, up 8.6% year over year.
Reimbursed Travel sales amounted to $23.9 million, up 6% from the year-ago quarter.
Margins
Gross margin in the first quarter was 82.1%, almost flat year over year.
Operating margin for the reported quarter was 15.1%, which contracted 427 basis points (bps) on a year-over-year basis.
The downside was caused by surge in operating expenses, which rose 6% year over year. The growth was driven by personnel expense related to revenue-generating associates and non-cash items.
Financial Position
Cerner exited the first quarter with free cash flow of $255.7 million. Operating cash flow totaled $409 million.
Long-term debt, including capital lease obligations, was $527 million, down slightly on a sequential basis.
View Downbeat
Cerner expects second-quarter 2018 revenues between $1.31 billion and $1.36 billion. The Zacks Consensus Estimate of $1.38 billion for the same, is higher than the projected range.
The second quarter of 2018 adjusted earnings per share is projected in the range of 59-61 cents. The range is lower than the Zacks Consensus Estimate of 66 cents.
For 2018, revenues are projected in the range of $5.33-$5.45 billion, down from a range of $5.45 billion to $5.65 billion. The Zacks Consensus Estimate of $ 5.54 billion for the same, is significantly higher than the projection.
Full-year 2018 adjusted earnings per share is estimated in the range of $2.45-$2.55, which lags the Zacks Consensus Estimate of $2.64.
Further. the company expects second-quarter 2018 new business bookings in the range of $1.35-$1.55 billion.
In Conclusion
Cerner exited the first quarter on a tepid note, missing the consensus mark on the top-line front. Revenues came below expectations due to software issues, technology resale, lesser-than-expected subscription bookings and the delay of the VA contract. A downbeat guidance indicates concerns for the stock. Further, lower margins on technology resale, resulting from higher mix of device resale is a concern. Additionally, Cerner has been facing macroeconomic challenges along with cutthroat competition in niche space. Surging operating expenses also add to the woes.
International growth is likely to boost with the company’s prospects in Australia, Canada, Middle East, U.K., Ireland and Germany. Cerner witnessed strong cash flow and record bookings. We believe that the company has growth opportunities in the revenue cycle management (RCM), Population Health and ambulatory markets based on its product strength and enviable track record of adding new clients. Solid growth in the HealtheIntent platform also holds promise. Further, the company recently reported a suite of developments in its EHR platform.
Q1 Earnings of MedTech Majors at a Glance
A few better-ranked stocks in the broader medical space which reported solid earnings this season are Baxter International Inc. (BAX - Free Report) , Varian Medical Systems, Inc. and Intuitive Surgical, Inc. (ISRG - Free Report) .
While Intuitive Surgical and Varian sport a Zacks Rank #1 (Strong Buy), Baxter carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Intuitive Surgical reported adjusted earnings of $2.44 per share, which surpassed the Zacks Consensus Estimate by 22.6%. Revenues totaled $848 million, which beat the Zacks Consensus Estimate by 10.6%.
Varian reported second-quarter fiscal 2018 adjusted earnings of $1.15 per share, which beat the Zacks Consensus Estimate of $1.06. Adjusted earnings improved 27.8% on a year-over-year basis.
Baxter reported first-quarter 2018 adjusted earnings per share of 70 cents, which beat the Zacks Consensus Estimate by 12.9% and improved from the year-ago quarter’s figure of 58 cents.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Click here to see the 5 stocks >>