Cerner Beats Ests, Profit Soars - Analyst Blog


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Leading healthcare information technology ("HCIT") solutions provider Cerner Corp ( CERN ) reported fourth quarter and fiscal 2011 earnings per share of 52 cents and $1.76, respectively, beating the corresponding Zacks Consensus Estimates of 50 cents and $1.74 and the year-ago earnings per share of 41 cents and $1.39 per share, respectively.

Net income rose 29.1% year over year to $91.2 million (or 52 cents per share) due to buoyant bookings. The stock was up 6.6% to $66.7 in after-hours trading on February 7.


Revenues for the fourth quarter rose 23% year over year to $615.6 million, handily beating the Zacks Consensus Estimate of $588 million. The corresponding figure for fiscal 2011 was $2,203 million, an increase of 19.1% year over year, surpassing the Zacks Consensus Estimate of $2,172 million.

In the reported quarter, higher revenue from Support, Maintenance and Services (up 17.4% to $384 million) was supported by robust System sales (up 34% to $220.5 million). Revenues from Reimbursed Travel were up 29.5% to about $11.2 million.

Bookings and Revenue Backlog

Bookings amounted to $899 million, an all time high for the company. Total revenue backlog came to $6.11 billion at the end of the fourth quarter, up 24% year over year, including $5.40 billion of contract backlog and $706 million of support and maintenance backlog. 


Gross margin for the quarter dropped to 78.6% from 81% a year ago. Operating margin increased to 22.4% from 20.7% in the prior-year quarter.

Balance Sheet & Cash flow

Cerner ended the quarter with cash, cash equivalents and short-term investment of $774.8 million, up 35.7% on a year-over-year basis. Total long-term debt and other obligations rose 27.8% year over year to about $86.8 million.

Cash flow from operation was a record $168.5 million in the reported quarter. Free cash flow increased to a new high of $118.2 million.


For the first quarter of 2012, the company forecasts sales in a band of $565 million and $585 million and adjusted earnings per share, before share based compensation expense, of 48 cents to 50 cents. Fresh bookings for the quarter are projected between $560 million and $600 million. Cerner projects stock-based compensation costs to dilute first quarter earnings by about 3 cents.

For fiscal 2012, the company forecasts sales in the region of $2,425 million and $2,500 million. Adjusted earnings per share, before share based compensation expense, are expected to be in the neighborhood of $2.20 and $2.30. Cerner projects stock-based compensation costs to dilute fiscal earnings by about 12 cents to 14 cents.

We believe long-term investors may consider Cerner, which serves a sizeable installed hospital base that requires composite clinically-focused applications complying with "meaningful use" requirements, reimbursement problems and complex coding challenges. The company has long-standing, integrated and seamless solutions for both inpatient and ambulatory settings.

On the negative side, the federal Stimulus program will gradually wind down. Moreover, the favorable growth prospects are already factored into the stock price and the risk-reward trade-off is fairly poised. Cerner faces stiff competition from established HCIT players, such as Athenahealth ( ATHN ), Allscripts-Misys ( MDRX ) and Quality Systems ( QSII ) and many others in a crowded field. We are currently Neutral on Cerner.

ATHENAHEALTH IN ( ATHN ): Free Stock Analysis Report
CERNER CORP ( CERN ): Free Stock Analysis Report
ALLSCRIPTS HLTH ( MDRX ): Free Stock Analysis Report
QUALITY SYS ( QSII ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
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