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Cerner (CERN) to Report Q1 Earnings: What's in the Cards?

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Cerner Corporation’s CERN first-quarter 2020 results are scheduled to release on Apr 28, after the closing bell. In the last reported quarter, the company delivered a positive earnings surprise of 1.4%. Further, it has a trailing four-quarter positive earnings surprise of 1.5%, on average.

Q1 Estimates

The Zacks Consensus Estimate for first-quarter earnings is pegged at 68 cents, suggesting an improvement of 11.5% from the year-ago quarter. The same for revenues is pegged at $1.43 billion, indicating growth of 3.1% from the year-ago reported figure.

Factors to Influence Q1

Cerner’s first-quarter performance is expected to reflect an improvement in revenues across professional and managed services segments, and licensed software and subscriptions business lines. Notably, the company expects revenues to range between $1.42 billion and $1.47 billion in the first quarter. The mid-point of this range suggests growth of 4% from the year-ago quarter.

Given the structural and process changes made by the company, Cerner has become more focused and efficient, which in turn is likely to have improved predictability and profitability. In fact, adjusted earnings per share is expected in the band of 69-71 cents in the first quarter. The mid-point of this range is 15% higher than the year-ago quarter.

Cerner Corporation Price and EPS Surprise

 

Cerner Corporation Price and EPS Surprise

Cerner Corporation price-eps-surprise | Cerner Corporation Quote

Further, strong contributions from the key areas, namely Population Health, Revenue Cycle and IT Works are anticipated to get reflected in the company’s first-quarter results. Moreover, better-than-expected non-U.S. revenues are likely to have impacted the to-be-reported quarter’s performance.

In fourth-quarter 2019, the company completed the acquisition of AbleVets for about $75 million (in cash consideration). Cerner has been integrating AbleVets’ service offerings into its portfolio to accelerate growth in the federal space. Per management, the buyout is expected to contribute about $90 million to revenues in 2020. Consequently, we expect this contribution to reflect in the to-be-reported quarter’s performance.

During third-quarter 2019, the company announced an investment and partnership with i2i Systems. i2i holds 25% market share within the federally qualified health centers segment, which covers nearly a third of all Medicaid patient data and has a strong payer business with 13 managed care clients. Consequently, the positive impact of the partnership is likely to get reflected in the first-quarter performance.

On the back of the cumulative impact of the optimization work that Cerner has already done and plans to do in 2020, the company is likely to have witnessed operating margin expansion in the first quarter.

However, the company is likely to have experienced a decline in gross margin in the to-be-reported quarter primarily due to higher mix of third-party services.

Here’s What the Quantitative Model Suggests

Per our proven model, a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here as you will see below.

Earnings ESP: Cerner has an Earnings ESP of -6.53%. 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 #3.

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.

Chemed Corporation CHE has an Earnings ESP of +0.42% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Aphria Inc. APHA has an Earnings ESP of +35.71% and a Zacks Rank #2.

DexCom, Inc. DXCM has an Earnings ESP of +143.90% and a Zacks Rank of 2.

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