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Analyst Blog

Cerner Corporation (CERN - Free Report) declared that its board has authorized a share repurchase program of up to $500 million of the company's common stock. The authorization reflects the board’s confidence in the company's ability to generate strong free cash flows even in a challenging market environment. No time limit was set for completion of the program. The repurchase will be funded from working capital.

Cerner ended the third quarter of 2016 with $837 million of total cash and investments compared with $720 million in the second quarter. Total debt for Cerner, including capital lease obligations, totaled $573 million. Operating cash flow for the quarter was $240 million, down from $272 million in the year-ago quarter.

We believe Cerner’s strong product portfolio will help it to win customers in the rest of 2016 and beyond. The company has growth opportunities in revenue cycle management, Population Health and ambulatory market based on its product strength and an enviable track record. Additionally, the growing percentage of higher margin software in the company’s business mix is expected to drive margins.

However, the HCIT market is highly competitive, which exerts considerable pressure on both pricing and margins. Moreover, a growing proportion of low-margin services and technology resale may affect margins. Meanwhile, stringent hospital budgets put further pressure on pricing.
 

Cerner designs, develops, markets, installs and supports information technology and content solutions for healthcare organizations and consumers. The company's integrated suite of solutions enable healthcare providers to improve operating effectiveness, reduce costs and improve the quality of care as measured by clinical outcomes.

Zacks Rank & Key Picks

Currently, Cerner carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader medical sector are HMS Holdings Corp. (HMSY - Free Report) , Cambrex Corporation (CBM - Free Report) and Streamline Health Solutions, Inc. (STRM - Free Report) , all of which sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

HMS Holdings represents a strong long-term expected growth rate of 14.76%. Notably, the company has a solid one-year return of almost 40.22%.

Cambrex has a positive year-to-date return of roughly 13.3%. The company also has a promising long-term expected growth rate of 15.00%.

Streamline Health represents a stellar year-to-date return of 17.73%. The company has a long-term expected growth rate of almost 15.00%.

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