Cerner Remains Neutral - Analyst Blog

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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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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