Cerner 2Q numbers

As promised, we are looking at the results of Cerner from two days ago. Cerner is a support system to the medical industry, supporting hospitals by providing critical digital solutions all the way through from dispensing of medicines to making sure the accounts are in order. By providing services software to make medical care more about the care, than the admin. Enabling care givers to go about their jobs easier, that is essentially Cerner's job.

18 thousand facilities worldwide are connected via their technologies. There is certainly a load of work to do, recently the company was awarded the job of digitising the US Military health records, 9.5 million in total. The amount of paperwork needed in hospitals is mind-blowing, using existing technologies to minimise mistakes and thereby reduce human error which ultimately saves lives. If the pharmacy dispenses the right medication, if the right medication is administered, and there is an electronic trail all of the time, everyone can be assured that the right thing is being done for the patient.

These results were for the second quarter to end June, revenues were lighter than the company had guided at 1.126 billion Dollars, that was still a 32 percent increase on the corresponding quarter last year. Good work. Bookings however were at an all time high during the quarter, at 1.29 billion Dollars, the backlog is now 13.3 billion Dollars, an increase of 37 percent from a year ago. Even though that was the first number introduced in the second quarter results, it was largely ignored by the market, record bookings that is. Adjusted diluted EPS was also 30 percent higher than the corresponding quarter, clocking 52 cents and inline with consensus.

The company updated their full year guidance to be 4.475 to 4.575 billion Dollars in revenue, lower than the 4.65 to 4.8 billion Dollars, leaving EPS guidance at 2.09 to 2.15 Dollars, the current quarter guided slightly lower, a voluntary separation plan expense impacting. That reflects a 28 percent growth on the prior year at the midpoint. So, forward, at 67.30 Dollars, the stock trades at 31.6 times. With a PEG ratio of 1.11, PEG being price to earnings (in this case 31.6 times) over growth, in this case 28 percent. You would expect high growth companies to have higher valuations.

The company is growing fast and is starting to become the "choice" and go-to business in their field. There is an enormous amount of work to do, and whilst the stock looks expensive, it has the forward growth rates to match the market rating. This moderate fall back in the share price represents an opportunity to buy a few more at these lower levels. We maintain our positive outlook for the company (and the stock) and are still rated a buy!