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Cerner (CERN) Down 1.7% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Cerner (CERN - Free Report) . Shares have lost about 1.7% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Cerner due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Cerner Q2 Earnings Beat Estimates, Revenues Miss

Cerner Corporation delivered second-quarter 2019 adjusted earnings of 66 cents per share, which beat the Zacks Consensus Estimate of 64 cents by 3.1%. The bottom line also improved from the prior-year quarter’s figure by 6.5%.
 
The company reported revenues of $1.43 billion, which increased 4.6% year over year but missed the Zacks Consensus Estimate of $1.44 billion by 0.4%.

Revenues by Geography
 
Per management, U.S. revenues grossed $1.27 billion, up 5% from the prior-year quarter.

Non-U.S. revenues remained flat from the year-ago quarter figure at $165 million. Per management, Cerner’s international revenue growth was impacted by foreign exchange rates.
 
Bookings
 
In the reported quarter, the company’s bookings totaled $1.43 billion, down from $1.78 billion in the same quarter of the last year.

Segmental Performance

Licensed software revenues shot up 14.3% to $197.1 million, driven by strong bookings and growth in both traditional software and SaaS offerings.
 
Technology resale revenues were $60.7 million, down 19.3% on a year-over-year basis.
 
Revenues from Subscriptions grossed $89.8 million, up 8.2% year over year.
 
Professional services’ revenues totaled $485.3 million, up 8.5% from the prior-year quarter number, on the back of solid growth in implementation services.
 
Revenues at the Managed services unit summed $297.7 million, up 4.2% from the prior-year quarter.
 
Support and maintenance revenues were $276.4 million, down 0.9% year over year.
 
Reimbursed travel revenues amounted to $24.1 million, reflecting a year-over-year decline of 4.9%.
 
Margins
 

In the quarter under review, gross profit summed $1.16 billion, up 3% year over year. Gross margin was 81.2%, down 130 bps on a year-over-year basis.
 
General and administrative expenses increased 56.9% to $149.8 million. Further, software development expenses rose 7.6% to $181 million.
 
Adjusted operating margin contracted 68 bps to 18% during the reported quarter.
 
Guidance
 
For the third quarter of 2019, Cerner expects revenues between $1.41 billion and $1.46 billion. The Zacks Consensus Estimate for revenues stands at $1.44 billion, towards the upper end of management’s guided range.
 
Adjusted earnings per share are expected between 65 cents and 67 cents. The Zacks Consensus Estimate stands at 69 cents, above the company’s guided range.
 
Cerner maintained 2019 revenue guidance. The company continues to expect revenues between $5.65 billion and $5.85 billion. The Zacks Consensus Estimate for revenues in 2019 stands at $5.74 billion, within the company’s guided range.
 
The company reiterated 2019 earnings per share outlook. The company continues to project the metric to be $2.64-$2.72 per share. The Zacks Consensus Estimate for earnings stands at $2.67, within the company’s estimated range.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -5.36% due to these changes.

VGM Scores

At this time, Cerner has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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 indicates a downward shift. 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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