Cerner Beats Ests, Profit Rises - Analyst Blog
February 06 2013 - 3:50AM
Zacks
Leading healthcare information
technology (“HCIT”) solutions provider Cerner
Corporation (CERN) reported fourth-quarter and 2012
earnings per share of 63 cents and $2.26, respectively, beating the
corresponding Zacks Consensus Estimates of 60 cents and $2.23 and
the year-ago earnings per share of 52 cents and $1.76 per share,
respectively.
Net income rose 22.6% year over
year to $111.8 million (or 63 cents per share) due to buoyant
bookings.
Revenues
Revenues for the fourth quarter
rose 15% year over year to $710.4 million, handily beating the
Zacks Consensus Estimate of $697 million. The corresponding figure
for 2012 was $2,665.4 million, an increase of 21% year over year,
surpassing the Zacks Consensus Estimate of $2,652 million.
In the reported quarter, higher
revenue from Support, Maintenance and Services (up 15.9% to $445.1
million) was supported by robust System sales (up 14.2% to $251.8
million). Revenues from Reimbursed Travel were up 21% to about
$13.5 million.
Bookings and Revenue
Backlog
Bookings amounted to $1.02 billion,
up 13% year over year and an all time high for the company. Total
revenue backlog came to $7.27 billion at the end of the fourth
quarter, up 19% year over year, including $6.53 billion of contract
backlog and $738.2 million of support and maintenance backlog.
Margins
Gross margin for the quarter
dropped slightly to 78.4% from 78.6% a year ago. Operating margin
increased marginally to 22.6% from 22.4% in the prior-year
quarter.
Balance Sheet & Cash
flow
Cerner ended the quarter with cash,
cash equivalents and short-term investment of $1,036.8 million, up
33.8% on a year-over-year basis. Total long-term debt and other
obligations rose 57.3% year over year to about $136.6 million.
Cash flow from operation was $180.6
million in the reported quarter, up 7.2% year over year. Free cash
flow was $99.4 million, down 15.9%.
Outlook
For the first quarter of 2013, the
company forecasts sales in a band of $690 million and $715 million
and earnings per share, before share based compensation expense, of
61 cents to 63 cents. Fresh bookings for the quarter are projected
between $720 million and $760 million. Cerner projects stock-based
compensation costs to dilute first-quarter earnings by about 4
cents.
For 2013, the company forecasts
sales in the region of $2,950 million and $3,050 million. Earnings
per share, before share based compensation expense, are expected to
be in the neighborhood of $2.75 and $2.82. Cerner projects
stock-based compensation costs to dilute earnings by about 16 cents
to 17 cents.
We believe long-term investors may
consider Cerner, which serves a sizeable installed hospital base
that requires composite clinically-oriented applications complying
with “meaningful use” requirements, reimbursement difficulties and
complicated 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 is gradually winding down. Moreover, the favorable
growth prospects are already factored into the stock price and the
risk-reward trade-off appears to be fairly poised. Cerner faces
stiff competition from established HCIT players, such as
Athenahealth (ATHN).
We currently have a Zacks Rank #4
(Sell) on Cerner. However, we are more positive about other stocks
such as Merge Healthcare Incorporated (MRGE) and
Becton, Dickinson and Company (BDX) both of which
carry a Zacks Rank #2 (Buy) and are expected to do well.
ATHENAHEALTH IN (ATHN): Free Stock Analysis Report
BECTON DICKINSO (BDX): Free Stock Analysis Report
CERNER CORP (CERN): Free Stock Analysis Report
MERGE HEALTHCAR (MRGE): Free Stock Analysis Report
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