Cerner (CERN) to Report Q2 Earnings: What's in the Offing?

Cerner Corporation’s CERN second-quarter 2020 results are scheduled to release on Jul 29, after the closing bell. In the last reported quarter, the company delivered earnings surprise of 5.9%. Further, it beat estimates in each of the trailing four quarters, the average surprise being 3%.

Q2 Estimates

The Zacks Consensus Estimate for second-quarter earnings is pegged at 61 cents, suggesting a decline of 7.6% from the year-ago quarter. The same for revenues stands at $1.36 billion, indicating a decrease of 5.1% from the year-ago reported figure.

Factors to Note

Improvement in revenues across Subscriptions and Managed services segments, and Licensed software business lines is likely to get reflected in Cerner’s second-quarter results. Notably, the company expects revenues between $1.34 billion and $1.39 billion in the to-be-reported quarter.

Unlike first-quarter 2020, which had witnessed partial impact of the COVID-19 pandemic, the second quarter bore the brunt of it. Consequently, the company’s revenues are likely to reflect the impact of the same.

In fact, adjusted earnings per share is expected in the band of 60-64 cents in the second quarter. The mid-point of this range is 6% lower than the year-ago quarter, reflecting the anticipated impact from the pandemic.

Cerner Corporation Price and EPS Surprise

Cerner Corporation Price and EPS Surprise

Cerner Corporation price-eps-surprise | Cerner Corporation Quote

Nonetheless, strong contributions from the key areas, namely Population Health, Revenue Cycle and IT Works might get reflected in the company’s second-quarter results. Moreover, better-than-expected non-U.S. revenues are likely to have contributed to the to-be-reported quarter’s performance.

In fourth-quarter 2019, the company completed the acquisition of AbleVets for about $75 million (in cash consideration). Cerner has been integrating AbleVets’ service offerings into its portfolio to accelerate growth in the federal space. Per management, the buyout is expected to contribute about $90 million to revenues in 2020. Consequently, we expect this contribution to get reflected in the second-quarter performance.

In first-quarter 2020, Cerner entered into collaboration with CoverMyMeds. Per the deal, the company will integrate patient-specific information into the electronic health record (EHR). Apart from providing detailed price information to consumers, this development enables healthcare providers to review prescription pricing information at the point of care. Hence, we expect this initiative to get reflected in in the to-be-reported quarter’s performance.

The company is likely to have witnessed operating margin expansion in the second quarter driven by the cumulative impact of the optimization work that it has already done and plans to do in 2020.

Here’s What the Quantitative Model Suggests

Per our proven model, a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here as you will see below.

Earnings ESP: Cerner has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Cerner carries a Zacks Rank #2.

Stocks Worth a Look

Here are some medical stocks worth considering as these have the right combination of elements to post an earnings beat this quarter.

Integra LifeSciences Holdings Corporation IART has an Earnings ESP of +20.69% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Exact Sciences Corporation EXAS has an Earnings ESP of +6.69% and a Zacks Rank of 2.

Hologic, Inc. HOLX has an Earnings ESP of +12.27% and a Zacks Rank of 3.

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