Cerner Beats Forecasts, Profit Up - Analyst Blog

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Leading healthcare information technology ("HCIT") solutions provider Cerner Corp ( CERN ) reported first quarter earnings per share of 51 cents beating the Zacks Consensus Estimate of 47 cents and the year-ago earnings per share of 37 cents.

Net income rose 37.4% year over year to $88.7 million (or 51 cents per share) due to buoyant bookings.

Revenues

Revenues for the first quarter rose 30% year over year to $641.2 million, handily beating the Zacks Consensus Estimate of $578 million.

In the reported quarter, higher revenue from Support, Maintenance and Services (up 18.4% to $403.9 million) was supported by robust System sales (up 60.9% to $225.8 million). Revenues from Reimbursed Travel were up 11.6% to about $11.5 million.

Bookings and Revenue Backlog

Bookings amounted to $652.3 million, up 24% year over year, a record high for the company in any first quarter. Total revenue backlog came to $6.27 billion at the end of the first quarter, up 22% year over year, including $5.57 billion of contract backlog and $704 million of support and maintenance backlog. 

Margins

Gross margin for the quarter dropped to 75.4% from 81.6% a year ago. Operating margin increased to 19.9% from 19.1% in the prior-year quarter.

Balance Sheet & Cash flow

Cerner ended the quarter with cash, cash equivalents and short-term investment of $893.9 million, up 46.3% on a year-over-year basis. Total long-term debt and other obligations rose 45.1% year over year to about $107.9 million.

Cash flow from operation was $162.7 million in the reported quarter, up 28.6% year over year. Free cash flow was $113.3 million, up 33.8%.

Outlook

For the second quarter of 2012, the company forecasts sales in a band of $620 million and $640 million and adjusted earnings per share, before share based compensation expense, of 52 cents to 54 cents. Fresh bookings for the quarter are projected between $675 million and $715 million. Cerner projects stock-based compensation costs to dilute second quarter earnings by about 3 cents.

For fiscal 2012, the company forecasts sales in the region of $2,525 million and $2,600 million. Adjusted earnings per share, before share based compensation expense, are expected to be in the neighborhood of $2.25 and $2.32. 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. 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. Our Outperform recommendation is supported by a short-term Zacks #2 Rank (Buy).


 
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 The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: ATHN , CERN , MDRX , QSII

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