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Cerner (CERN) Q3 Earnings and Revenues Surpass Estimates

Cerner's (CERN) third-quarter results benefit from gains across four of its business units.

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This story originally appeared on Zacks

Cerner Corporation CERN reported third-quarter 2021 adjusted earnings of 86 cents per share, which beat the Zacks Consensus Estimate of 82 cents by 4.9%. The bottom line improved 19.4% from the prior-year quarter.



GAAP EPS in the quarter was 59 cents, down 49% from the prior-year quarter.

- Zacks

Revenue Details

The company reported revenues of $1.47 billion, which surpassed the Zacks Consensus Estimate by 1.2%. The top line increased 7.3% from the year-ago quarter.

Segmental Performance

Licensed software revenues were $199.2 million, which climbed 16% from the year-ago quarter.



Technology resale revenues were $37.6 million, down 20.2% on a year-over-year basis.



Revenues from Subscriptions were $91.8 million, down 1.8% year over year.

Cerner Corporation Price, Consensus and EPS Surprise

Cerner Corporation Price, Consensus and EPS Surprise

Cerner Corporation price-consensus-eps-surprise-chart | Cerner Corporation Quote

Professional services’ revenues totaled $551.7 million, up 14.9% from the prior-year quarter figure.



Revenues at the Managed services unit amounted to $323.1 million, up 3.6% from the prior-year quarter.



Support and maintenance revenues were $257 million, down 1.1% year over year.



Reimbursed travel revenues amounted to $7.5 million, reflecting year-over-year increase of 58.9%.

Margins

In the quarter under review, gross profit was $1.22 billion, up 7% on a year-over-year basis. Gross margin was 82.9%, down 20 basis points (bps) on a year-over-year basis.



General and administrative expenses increased 3.9% to $121.4 million. Software development expenses rose 8.5% to $241.6 million.



Operating income totaled $224.9 million, down 45.4% from the prior-year quarter. Operating margin contracted 1480 bps on a year-over-year basis to 15.3%.

Financial Position

The company exited the third quarter with cash and cash equivalents of $459.5 million, compared with $246.4 million in the previous quarter.



Cumulative net cash from operating activities in the third quarter totaled $1.25 billion, compared with $924 million in the year-ago period.



Cumulative free cash flow amounted to $764.9 million, compared with $461.3 million.

2021 Guidance

For fourth-quarter 2021, Cerner anticipates revenues to improve in upper-mid-single digits over fourth-quarter 2020. The Zacks Consensus Estimate for revenues stands at $1.49 billion.



For fourth-quarter 2021, adjusted EPS is anticipated to improve in the range of 10% to 13% over the prior-year quarter. The consensus mark for earnings is pegged at 88 cents.



For full-year 2021, revenues are projected to grow around 5% in line with the prior guidance of mid-single digit growth. The Zacks Consensus Estimate for revenues stands at $5.78 billion.



Adjusted EPS is expected to be more than $3.30 (up from the previous guidance of above $3.25). The consensus mark for earnings is pegged at $3.25.

Wrapping Up

Cerner exited the third quarter on a strong note, wherein both earnings and revenues beat the Zacks Consensus Estimate. Solid gains in four of the company’s business units buoy optimism. Apart from this, the company repurchased shares worth $375 million in the quarter under review.



Per management, the robust performance reflected the company’s robust progress in its transformation initiatives, cost control measures and a strong market presence.



The company saw a decrease in revenues in Technology resale, Subscriptions and Support and maintenance segments. Contraction in both gross and operating margins is a headwind. Competition in the global MedTech space remains a concern.

Zacks Rank

Currently, Cerner carries a Zacks Rank #4 (Sell).

Earnings of Other MedTech Majors at a Glance

Some better-ranked stocks in the broader medical space that have already announced their quarterly results are Thermo Fisher Scientific Inc. TMO, West Pharmaceutical Services, Inc. WST, and AngioDynamics, Inc. ANGO. While both Thermo Fisher and West Pharmaceutical carry a Zacks Rank of 2 (Buy), AngioDynamics sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.



Thermo Fisher reported third-quarter 2021 adjusted EPS of $5.76, which beat the Zacks Consensus Estimate by 23.3%. Third-quarter revenues of $9.33 billion outpaced the consensus mark by 12%.



West Pharmaceutical reported third-quarter 2021 adjusted EPS of $2.06, which surpassed the Zacks Consensus Estimate by 13.2%. Third-quarter revenues of $706.5 million outpaced the Zacks Consensus Estimate by 3.2%.



AngioDynamics reported first-quarter fiscal 2022 loss per share of 2 cents, narrower than the Zacks Consensus Estimate of a loss of 5 cents. Revenues of $76.9 million surpassed the Zacks Consensus Estimate by 8.4%.



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