We reiterate our Neutral rating on
Cerner
(
CERN
), a leading healthcare information technology ("HCIT") solutions
provider. Its third quarter adjusted earnings per share of 45 cents
met the Zacks Consensus Estimate. Revenues of $571.6 million were
higher than the Zacks Consensus Estimate of $533 million.
Increased revenue from Support, Maintenance and Services (up
15.6% to $371.5 million) was supported by higher System sales (up
41.4% to $188.7 million). Revenues from Reimbursed Travel jumped
44.2% to about $11.5 million.
Bookings amounted to $650.3 million, up 31% year over year,
which was the second highest in the company's history. Total
revenue backlog stood at $5.66 billion at the end of the third
quarter, up 21% year over year, including $4.96 billion of contract
backlog and $691 million of support and maintenance
backlog.
For the fourth quarter, the company forecasts sales in a band of
$575 million and $595 million and adjusted earnings per share,
before share based compensation expense of 51 cents to 53 cents.
Fresh bookings for the quarter are projected between $630 million
and $670 million. Cerner projects stock-based compensation costs to
dilute fourth quarter earnings by about 3 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. The stock currently retains
a Zacks #2 Rank, which translates into a short-term "Buy"
recommendation.
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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