Cerner Corporation’s third-quarter 2018 results are scheduled to release on Oct 25, after market close. The company is likely to see a soft quarter owing to decline in the core Support, Maintenance and Services segment revenues. A positive guidance is encouraging.

Q2 Results

In the last reported quarter, the Missouri-based MedTech giant posted adjusted earnings per share of 62 cents which beat the Zacks Consensus Estimate by 3.3%. Earnings also improved by a penny from the year-ago quarter.

Revenues of $1.37 billion rose 5.9% on a year-over-year basis and surpassed the Zacks Consensus Estimate of $1.33 billion.

Which Way Are the Estimates Treading?

For the quarter to be reported, the Zacks Consensus Estimate for earnings is pegged at 63 cents, reflecting year-over-year growth of 3.3%. The same for revenues is pinned at $1.36 billion, reflecting year-over-year growth of 6.7%.

For investors’ information, Cerner reported through seven segments instead of three. The segments are Licensed software, Technology Resale, Subscriptions, Professional services, Managed services, Support and Maintenance and Reimbursed Travel.

Let’s delve deeper.

Support, Maintenance & Services in Focus

In the last reported quarter, this segment accounted for 20.4% of the company’s net sales. Revenues in the segment came in at $279 million, up 7.5% year over year.

For the quarter to be reported, the Zacks Consensus Estimate is pegged at $906 million, showing a year-over-year decline of 2.4%.

Thus, softness in the segment might mar the company’s revenue growth in the third quarter.

Other Factors at Play

System Sales & Reimbursement Travel

In the quarter to be reported, Cerner’s two business units, System Sales and Reimbursement and Travel, are likely to disappoint.

In the last reported quarter, Reimbursement and Travel contributed a mere 0.02% to net sales, while revenues in System Sales were not reported.

For the quarter to be reported, the Zacks Consensus Estimate for Reimbursement and Travel stands at $24.1 million, reflecting a marginal fall from the year-ago quarter’s $24.2 million. In fact, the same for System Sales is pegged at $313 million, showing a decline of 3.4% from the prior-year quarter.

Guidance Positive

For the third quarter of 2018, revenues are expected between $1.34 billion and $1.39 billion.

Earnings per share for the quarter are anticipated between 62 cents and 64 cents.

Third-quarter bookings are projected in the band of $1.45-$1.65 billion.

What Does Our Model Say?

Per our proven model, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver a positive earnings surprise in the quarter. This is not the case here as you will see below.

Earnings ESP: Cerner has an Earnings ESP of -0.41%. 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 #4 (Sell).

Please note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revision.

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.

Bio-Rad Laboratories (BIO Quick QuoteBIO - Free Report) has an Earnings ESP of +9.60% and a Zacks Rank #3.

Baxter International Inc (BAX Quick QuoteBAX - Free Report) has an Earnings ESP of +0.90% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Masimo Corporation (MASI Quick QuoteMASI - Free Report) has an Earnings ESP of +0.98% and a Zacks Rank #2.

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