Friday, September 27, 2013

Cerner Announces Intermountain Partnership, Shares up ~8%

Cerner Corporation traded up today ~8% after announcing a multi-year strategic partnership with Intermountain Healthcare. The partnership will implement Cerner’s electronic medical record and revenue cycle solutions across all of the Utah-based firm’s 22 hospital and 185 clinics. The collaboration will utilize Intermountain’s industry leading clinical processes and data warehouse. In addition, the team seeks to build a new set of tools for a post-fee-for-service world in areas such as activity-based costing. As part of the Intermountain agreement Cerner intends to relocated a couple key executives to Salt Lake City to help implement the new collaboration. The deal comes as a victory amongst Epic who was beat out for the contract “up for grabs.” The deal is estimated to be worth in the range of $75-$100MM of revenue opportunity beginning in 2014. We have increased both our FY 14 and FY15 EPS estimates $.04 to reflect the revenue opportunity. Our price target increase to $58.92  from $57.55 represents a 32.6x multiple to our FY14 EPS estimate of $1.81 up from $1.77. Currently the stock is valued at 43.6x ttm earnings around $53.71 and ~10% away from our updated price target.

Wednesday, September 4, 2013

Verizon and Vodafone Buyout Agreement

Verizon announced Monday that it will pay $130 billion for the remaining 45% stake in Verizon Wireless owned by Vodafone. This is the second-largest acquisition deal on record. 
Vodafone PLC will get additional cash to expand in Europe and buy other cellphone providers. Verizon Communications Inc. can boost its quarterly earnings, as it would no longer have to share a portion of proceeds. Once the deal closes, Verizon expects EPS to rise by 10%. This deal is expected to close in the 1Q of 2014. 
Under deal terms, Verizon will pay $58.9 million in cash and $60.2 billion in stock, and issue $5 billion in senior notes payable to Vodafone and sell its 23.1% minority stake in Vodafone Omnitel NV to Vodafone for $3.5 billion. The remaining $2.5 billion will be paid in other ways.
Verizon wanted the profits from Vodafone's 45% stake in Verizon Wireless. Verizon feared that fears of pressure on interest rates inspired by U.S. economic recovery could make a purchase more expensive, so it acted quickly.
In the April-to-June quarter, Verizon Wireless added 940k+ devices to its contract-based plans, exceeding analyst estimates and continuing a strong run. It boosted service revenue by 8.3% from a year ago.
Separately, Verizon raised its quarterly dividend by a penny and a half to $.53. That makes its annual dividend $2.12 from $2.06.