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Why Is Cerner (CERN) Up 6.8% Since Last Earnings Report?

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A month has gone by since the last earnings report for Cerner (CERN - Free Report) . Shares have added about 6.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Cerner due for a pullback? 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 Q1 Earnings Beat Estimates, Revenues Miss

Cerner Corporation reported first-quarter 2021 adjusted earnings of 76 cents per share, which beat the Zacks Consensus Estimate of 74 cents by 2.7%. The bottom line improved 7% from the prior-year quarter.

Revenue Details

The company reported revenues of $1.39 billion, which missed the Zacks Consensus Estimate by 0.9%. Also, the top line declined 1.7% from the year-ago quarter.

Revenues by Geography

U.S. revenues grossed $1.22 billion, down 1.9% from the prior-year quarter.

Non-U.S. revenues up 0.3% to $165.8 million from the year-ago quarter.

Bookings

In the reported quarter, the company’s bookings totaled $1.23 billion, up 13% from the year-ago quarter.

Segmental Performance

Licensed software revenues were $161.7 million, which increased 2.3% from the year-ago quarter.

Technology resale revenues were $45.7 million, down 11.3% on a year-over-year basis.

Revenues from Subscriptions were $99.8 million, up 5.7% year over year.

Professional services’ revenues totaled $494.4 million, down 3.3% from the prior-year quarter number.

Revenues at the Managed services unit amounted to $317.4 million, up 2.6% from the prior-year quarter.

Support and maintenance revenues were $263.3 million, down 3.8% year over year.

Reimbursed travel revenues amounted to $5.5 million, reflecting year-over-year decline of 59%.

Margins

In the quarter under review, gross profit was $1.16 billion, remaining flat on a year-over-year basis. Gross margin was 83.4%, up 150 basis points (bps) on a year-over-year basis.

General and administrative expenses decreased 19.7% to $112.4 million. However, software development expenses rose 3.8% to $192.3 million.

Operating income totaled $218.1 million, up 22.2% from the prior-year quarter. Operating margin expanded 310 bps on a year-over-year basis to 15.7%.

2021 Guidance

For second-quarter 2021, Cerner anticipates revenues to grow in the high-single digits over second-quarter 2020. The Zacks Consensus Estimate for revenues stands at $1.44 billion.

For second-quarter 2021, adjusted earnings per share is projected to grow around 20% over the prior-year quarter. The consensus mark for earnings is pegged at 75 cents.

For full-year 2021, revenues are projected to grow in the mid-single digits (replacing the previously guided range of $5.75 billion to $5.95 billion) but represents similar growth. The Zacks Consensus Estimate for revenues stands at $5.83 billion.

Adjusted earnings per share is expected to be more than $3.20 (up from the previously guided range of $3.10-$3.20). The consensus mark for earnings is pegged at $3.15.

How Have Estimates Been Moving Since Then?

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

VGM Scores

At this time, Cerner has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. 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 looks promising. Notably, Cerner has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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