Monday, April 29, 2013

Cerner Corporation 1Q13 Earnings Strong, FY13 EPS Guidance Marginally Up

Cerner Corporation reported 1Q13 earnings after the bell on April 25th. Revenues were up 6% to $680MM vs. $641.2MM last year, however, below consensus of $708.4MM due to reduced levels of low-margin technology resale. This had no material impact on adjusted EPS reported at $.66 up 22% from 1Q12 which beat consensus of $.63 due to strength in other areas. Q1 bookings were $801MM up 23% year over year and a record for the company in any first quarter. System sales were down 12% from the same period a year ago which grew 61% reflecting a tough comp. Gross margin increased substantially to 81.3% up from 78.3% in 4Q12 driven by lower mix of technology resale and strong service margins while operating margin increased 340 bps compared to 1Q12 to 24.7% as a result of ongoing operating efficiencies. 

The stock reacted positively soaring ~4.90% to $95.89 sitting near its 52 week high of $97.52. Management reiterated FY13 revenue of $2.95B-$3.05B and raised it's FY13 EPS to $2.78-$2.83 up from $2.75-$2.85. Cerner is well positioned to benefit from market place trends in IT healthcare and meaningful use healthcare reform. The company has a comprehensive approach to population health and significant progress is expected from their increased R&D investment and expanded relationship with Advocate Health Care- the largest accountable care organization in the U.S. We reiterate our BUY rating on Cerner Corporation and remain excited for expected margin improvements in addition to a robust product pipeline that will open up a new footprint of opportunities. 

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