Cerner reported a strong, second-quarter result in bookings and earnings. The company continues to see strength across the majority of its businesses, and it reflects Cerner’s enviable competitive position in the healthcare information technology industry. In light of the results, Morningstar is maintaining its $50-per-share fair value estimate.
On a year-over-year basis, revenue rose 11% to $707.6 million, adjusted net income increased 16% to $119.6 million, and adjusted diluted earnings per share grew 17% to $0.34. Revenue came in at the lower end of expectations due to lower technology resale. The variability of this resale is expected to continue for the foreseeable future given the unwillingness of third-parties to divulge too much.
Nevertheless, the bottom-line impact is negligible due to resale’s low margin nature. For the remainder of the year, Cerner expects to perform well. Management mentioned that business is as active as it’s ever been, and that there is very good demand from healthcare organizations looking to reduce costs and meet regulatory requirements. The firm reiterated its full-year guidance.
Bookings were at an all-time high, rising 33% to $935 million year-over-year, while total backlog rose 23% to $8 billion, year over year. Cerner declared it had six competitive wins in the ambulatory space against three different competitors, which supports our conviction in the company’s technology leadership. Analysts expect Cerner to continue to invest back into the business in order to capitalize on growth opportunities.
New infrastructure, capital expenditure in solutions such as population health, stock buybacks, and R&D will be the primary uses of cash. Analysts remain bullish in the long-term financial forecast, yet the company’s shares look fairly valued at their current price. .
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