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Cerner Q3 numbers

Cerner, the information systems healthcare service provider, reported numbers earlier this week. The company announced Third Quarter 2015 Results, that unfortunately missed the lofty expectations of the market, and more unfortunate was that this was the third quarter in a row that the company has come up shy of expectations.

Notwithstanding the earnings miss, revenues increased 34 percent and more importantly for future business, bookings (for the quarter) increased 44 percent to 1.59 billion Dollars, roughly 1.4 times the last quarter revenue. That is of course future business, the backlog currently stands at 13.9 billion Dollars, an increase of 37 percent from this time last year. Adjusted diluted earnings per share increased by 29 percent to 54 cents for the quarter.

The outlook for the current quarter was a revenue increase of 27 percent, diluted EPS to increase 21 percent to around 56-58 cents, new bookings are expected to again be higher than revenue projections for the quarter, forcing the backlogs even higher. I am sure that many businesses would like to have that problem, ever increasing demand for you product, the ability to meet it is important. That is why the 2016 outlook was probably not well met, revenues for the full year next year are estimated to increase by 13 percent to above five billion Dollars. And why that is disappointing is simple, the company expects current year revenues to increase 30 percent. The market is looking for better, the range of earnings consensus is around 2.52 Dollars a share. And on a share price 61.28 Dollars (the close last evening), that looks a little stretched at 24 times earnings forward.

I really like the company, I really like what they are trying to achieve, paperless hospitals and complete integration of all the services from admission to packing your bags and leaving. Everything in-between from dispensing post operative medication to administration of said medication, making sure that human error is cut to next to zero. In fact, even knowing about you before you get to the hospital, your medical records, to know what medicine may not be right for you, what has worked in the past.

There is not a single person I have ever met who I have explained the business to, who did not think that their business was definitely going to gain traction in the coming years, it is certainly an exciting space. Their software extends beyond the hospitals, into doctors practices, home health including long-term and Hospice caring, research laboratories, even into the workplace to ensure that your workers are healthier. And by extension, more productive, one less thing to worry about. Equally, the company offers complete information technology solutions for medical practices, hospitals, they understand the business of healthcare.

It remains unsettling when a stock you hold is pretty volatile. And whilst the outlook is a little more muted than perhaps hoped, the central thesis remains intact, we continue to accumulate the stock on weakness and still recommend the company as a buy. It certainly is a business that has a very bright future, the market is huge, not only in the US, amongst the rest of the world too. Technology and medicine go hand in hand to improve the experiences of all patients.


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