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Cerner (CERN) Earnings Beat Estimates in Q3, Improve Y/Y

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Cerner Corporation (CERN - Free Report) reported third-quarter 2019 adjusted earnings of 66 cents per share, which beat the Zacks Consensus Estimate of 65 cents by 1.5%. The bottom line also improved from the prior-year quarter figure by 4.8%.
 
The company reported revenues of $1.43 billion, which increased 6.7% year over year but missed the Zacks Consensus Estimate.

Revenues by Geography
 
Per management, U.S. revenues grossed $1.27 billion, up 6% from the prior-year quarter.

Non-U.S. revenues increased 8% to $164 million from the year-ago quarter.

Cerner Corporation Price, Consensus and EPS Surprise

 

Cerner Corporation Price, Consensus and EPS Surprise

Cerner Corporation price-consensus-eps-surprise-chart | Cerner Corporation Quote

Bookings
 
In the reported quarter, the company’s bookings totaled $1.65 billion, up 4% from the year-ago quarter.

Segmental Performance

Licensed software revenues improved 10.5% to $154.5 million, driven by strong growth in SaaS offerings.
 
Technology resale revenues were $70.2 million, up 16.2% on a year-over-year basis.
 
Revenues from Subscriptions grossed $91.9 million, up 16.2% year over year.
 
Professional services’ revenues totaled $507.5 million, up 11.1% from the prior-year quarter number, on the back of solid growth in implementation services.
 
Revenues at the Managed services unit summed $302.4 million, up 0.1% from the prior-year quarter.
 
Support and maintenance revenues were $277.3 million, down 0.2% year over year.
 
Reimbursed travel revenues amounted to $25.6 million, reflecting a year-over-year increase of 5.9%.
 
Margins
 
In the quarter under review, gross profit summed $1.16 billion, up 4.3% year over year. Gross margin was 80.9%, down 190 bps on a year-over-year basis.
 
General and administrative expenses increased 48.2% to $152.3 million. Further, software development expenses rose 8.8% to $187.5 million.
 
Adjusted operating margin contracted 110 bps to 18.1% during the reported quarter.

Guidance
 
For the fourth quarter of 2019, Cerner expects revenues between $1.41 billion and $1.46 billion. The Zacks Consensus Estimate for revenues stands at $1.47 billion, higher than management’s guided range.
 
Adjusted earnings per share are expected between 73 cents and 75 cents. The Zacks Consensus Estimate stands at 75 cents, lies within the company’s guided range.

New business bookings for the fourth quarter of 2019 is estimated to range between $1.45 billion and $1.65 billion.
 
Wrapping Up

 
Cerner exited the third quarter on a mixed note. The company continues to witness strong contributions from key areas like Population Health, Revenue Cycle and IT Works. Further, gains in Licensed software, Technology resale, Professional and Managed Services units buoy optimism. International revenues also moved up in the quarter. Bookings witnessed a noticeable improvement in the quarter under review.
 
The company benefited from electronic health record (EHR), electronic patient record (EPR) or electronic medical record (EMR) platforms that provide patient care in acute inpatient and outpatient settings.
 
Meanwhile, Support & Maintenance revenues witnessed a year-over-year decline in the quarter under review. Contraction in operating margins remains a concern. Furthermore, competition in the global MedTech space is a woe.

Zacks Rank

Currently, Cerner carries a Zacks Rank #3 (Hold).

Earnings of Other MedTech Majors at a Glance

Some better-ranked stocks which posted solid results this earning season are Intuitive Surgical, Inc. (ISRG - Free Report) , Thermo Fisher Scientific Inc. (TMO - Free Report) and ResMed Inc. (RMD - Free Report) , each carrying a Zacks Rank of 2. (Buy).

Intuitive Surgical delivered third-quarter 2019 adjusted earnings per share of $3.43, beating the Zacks Consensus Estimate by 15.9%. Revenues of $1.13 billion surpassed the Zacks Consensus Estimate by 6.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Thermo Fisher delivered third-quarter 2019 adjusted earnings of $2.94 per share, which surpassed the Zacks Consensus Estimate by 2.1%. Revenues of $6.27 billion outpaced the Zacks Consensus Estimate by 1.3%.

ResMed reported third-quarter 2019 adjusted earnings per share of 93 cents, which beat the Zacks Consensus Estimate of 87 cents by 6.9%. Revenues were $681.1 million, surpassing the Zacks Consensus Estimate by 3.6%.

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