Leading healthcare information technology (HCIT) solutions
), recently approved a $170 million share repurchase program, in
an effort to leverage shareholder return.
Future equity grants are likely to have a dilutive effect on
earnings. Thus the company initiated this repurchase program to
withstand the adverse effect of these grants. Cerner plans to
fund the program with its working capital. At the end of the
third quarter of 2012, Cerner had roughly $1.2 billion of working
capital at its resources.
Considering the closing price of $79.16 on Dec 12, 2012, the
company could have repurchased roughly 2.1 million shares (1.2%
of the company's outstanding shares). Given its strong balance
sheet, we believe that Cerner is comfortably positioned to
support the share buyback.
The repurchase will be executed from time to time in the open
market by block purchase or broker-dealer transactions. No
particular time limit was provided regarding the completion of
Till Dec 31, 2011, Cerner had repurchased roughly $28 million
shares under its previous stock repurchase program of $45
million, which was initiated in March 2008. However, the company
decided to discontinue the program in 2012.
Cerner remains the trend setter among pure-play, publicly
traded healthcare IT (HCIT) vendors. We believe that Cerner has
positioned itself as one of the better placed clinical technology
vendors to benefit from high HCIT spending over the next few
years. The company is diversified not only on a global basis but
serves both hospitals and ambulatory outfits. Its integrated
solutions have captured market share. While greenfield
opportunities are shrinking, the replacement market is
We believe that Cerner's sizeable installed hospital base will
attract long-term investors. Its clients require composite
clinically-focused applications complying with the 'meaningful
use' requirements and tackling coding challenges as well. The
company has long-standing, integrated and seamless solutions for
both in-patient and ambulatory settings.
On the negative side, the federal Stimulus program will
gradually wind down. Cerner faces stiff competition from
established HCIT players, such as
Allscripts Healthcare Solutions Inc.
Quality Systems Inc.
) and many others in a crowded field. The company is developing
multiple growth drivers which will ensure its future growth.
We have a long-term Neutral recommendation on Cerner. The
stock currently retains a short-term Zacks #3 Rank (Hold
ATHENAHEALTH IN (ATHN): Free Stock Analysis
CERNER CORP (CERN): Free Stock Analysis
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QUALITY SYS (QSII): Free Stock Analysis
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