Cerner 1Q - guides lower

Cerner is an American supplier of health information technology solutions, services, devices and hardware. Its one of our smaller holdings in New York portfolios.

The company had disappointing quarterly results out on Wednesday night, and the stock fell 4% yesterday. The outlook for the year ahead looks a bit cloudy, and guidance was lowered. Adjusted earnings per share are now expected to come in between $2.45-$2.55, from $2.57-$2.73 previously.

The company said, "Our mixed results and revised outlook reflect the delay of a large contract and a less predictable end market. However, we remain optimistic about our long-term growth opportunities due to our strong market position and portfolio of solutions and tech-enabled services that align with the pressures healthcare stakeholders are facing."

The contract referred to here is the Leidos Partnership for Defense Health. That deal was awarded in 2015 and includes Cerner, Accenture, and Leidos, in a 10-year, $4.3 billion contract to overhaul and manage the electronic health records for the US Department of Defense.



The company is also going through a leadership change. It was founded in 1979 by Neal Patterson, Paul Gorup, and Cliff Illig, who were colleagues at Arthur Andersen. Patterson was the CEO and dominant figure in the business, but he died from cancer in July 2017. Brent Shafer was named Chairman and CEO in January. He's a company outsider, having previously been CEO of Philips North America.

We advise all holders of the stock to be patient and wait for a resumption of revenue and profit growth. As you know, here at Vestact we believe that the healthcare and technology sectors are both attractive areas for investment. Cerner operates in both.