) posted a 15.6% year-over-year rise in earnings per share to 37
cents for the second quarter of 2014 from 32 cents in the
comparable quarter of 2013 and beat the Zacks Consensus Estimate by
a penny. Net earnings rose 14.3% to $129.0 million from $112.9
million in the second quarter of 2013.
Cerner Corporation - Earnings Surprise |
Revenues in the quarter grew 20.4% to $851.8 million, exceeding the
Zacks Consensus Estimate of $810 million. The increase can be
attributed to stronger revenues from all the businesses. Domestic
revenues rose 24% in the quarter. Global revenues continue to fall.
It was down 4% in the quarter mainly due to the timing of a couple
of global contracts.
Revenues from System sales revenues rose 17.0% to $234.6 million
driven by solid gains in software and technology resale. System
sales margin grew 19% in the quarter, driven by continued strong
Support, maintenance and services went up 20.9% to $588.2 million,
driven by strong growth in managed services and professional
services. Revenues from Reimbursed Travel escalated 42.2% to $29.0
Second quarter days sales outstanding were 66 days, a decline from
68 days in the comparable quarter of 2013.
Bookings revenues grew 15% to all-time high of $1.08 billion.
Bookings margin was $980 million or 91% of total bookings.
CERN's bookings performance led to a 21% increase in total backlog
to $9.7 billion. Contract revenue backlog increased 23% to $8.9
billion from the year-ago level. Support revenue backlog went up 7%
to $806.6 million in the quarter.
Gross margin for the quarter was 80.9%, down 130 basis points (bps)
from 82.2% in the prior-year quarter due to higher level of third
party services to support a significant number of systems.
Operating earnings rose 15.1% to $191.6 million from $166.5 million
in the year-ago quarter. Operating margin in the quarter dipped 100
bps to 22.5% from 23.5% in the 2013-second quarter, due to
increases in third party services and reimbursed travel revenues.
CERN had cash and cash equivalents of $315.3 million as of Jun 28,
2014, significantly up by 55.8% from $202.3 million as of Dec 28,
2013. Total long-term debt and capital lease obligations declined
6.3% to $155.4 million as of Jun 28, 2014 compared with $165.8
million as of Dec 28, 2013.
In the first half of the year, cash flow from operating activities
improved 3.6% to $404.1 million from $390.2 million in the
2013-first half. Capital expenditure ebbed 2.2% to $132.0 million
compared with $135.0 million in the year-ago period. As a result,
free cash flow rose 4.6% to $185.4 million from $177.3 million in
In December last year, CERN's board of directors approved
authorization of stock repurchase of up to $217 million of the
company's common stock. Thereafter, in May this year, CERN
authorized the repurchase of up to an additional $100 million of
its common stock.
In the second quarter of 2014, CERN repurchased 2.8 million shares
for roughly $142 million, bringing its year-to-date repurchase to
4.1 million shares for an investment of $217 million. With this,
the company has exhausted the approved share repurchase
authorization in December of 2013. However, CERN still has an
additional $100 million worth of shares remaining under the
approved authorization in May.
For the third quarter of 2014, CERN anticipates revenues between
$840 and $870 million, the midpoint of which implies a growth of
17% over the 2013-quarter. Adjusted earnings are expected between
38 and 39 cents per share, including share based compensation
expense. These compared with the Zacks Consensus Estimates of $834
million 39 cents for revenues and earnings per share, respectively
for the quarter.
The leading healthcare information technology ("HCIT") solutions
provider also expects 2014-third quarter new business bookings
between $1 and $1.1 billion, the mid-point of which reflects a 13%
growth over the prior-year quarter.
For full year 2014, CERN upgraded revenues guidance to the range of
$3.3 to $3.4 billion from the prior range of $3.25 to $3.4 billion.
Adjusted earnings are also expected to be higher at $1.64-$1.67,
compared with the prior range of $1.63 to $1.67, excluding share
based compensation expense (which is expected to be 11 to 12 cents
for the full year). These compared with the Zacks Consensus
Estimates of $3.3 billion and $1.54 for revenues and earnings per
share, respectively for the year.
For 2014, CERN expects capital expenditures between $260 and $280
million, down from $353 million in 2013. It also anticipates
capitalized software to remain in the mid-$40 million range per
quarter throughout the year, which is flat or modestly higher than
$175 million capitalized in 2013.
Currently, CERN retains a Zacks Rank #3 (Hold). We believe
long-term investors may consider CERN, which serves a sizeable
installed hospital base that requires composite clinically-oriented
applications complying with "meaningful use" needs, reimbursement
difficulties and coding challenges. The company has long-standing,
integrated and seamless solutions for both inpatient and ambulatory
However, competition is fierce with well reputed names such as
Allscripts Healthcare Solutions (
), athenahealth (
), Quality Systems (
). The intensity of competition may pressure both pricing and
margin. Stringent hospital budgets place further pressure on
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
CERNER CORP (CERN): Free Stock Analysis Report
ATHENAHEALTH IN (ATHN): Free Stock Analysis
ALLSCRIPTS HLTH (MDRX): Free Stock Analysis
QUALITY SYS (QSII): Free Stock Analysis Report
To read this article on Zacks.com click here.