We have been forced to exit our full position in Cerner Corp as they have hit their stop loss following the release of their first quarter earnings. Cerner Corp reported 1Q14 earnings April 24th and held a corresponding conference call after market at 4:30 E.S.S. Quarterly revenue came in at $785M, up 15% YoY, which was in-line with street estimates yet just short of our estimates of $811M. Adjusted EPS was reported at $0.37 per diluted share, up 11% YoY, which was in-line with estimates once again but short of our bullish prediction of $0.38. Cerner has also reiterated they have purchased 1.3 million shares and still have $142M left.
Due to a tough comparable in global hardware sales, tech resale declined in Q1, however, system sales revenue increased 4% offsetting the decline. Total services revenue was up 25% YoY due to strong growth in managed services and solid contributions from ITWorks and RevWorks. Although there were contributions from ITWorks and RevWorks Cerner was unable to form any new deals with clients. A big driver of revenue in Q1 was ongoing sales of their broad suite of Revenue Cycle solutions. A major milestone was achieved last year with the release of Healthe Intent Smart Registries solution which is a cloud-based platform that aggregates, normalizes, and standardizes clinical population data. This quarter, Healthe Intent Smart Registries, along with Patient Portal, Enterprise Data Warehouse, and clinical process optimization, all had strong sales and these pipelines remain strong for the year. Since January Cerner has also added 5 new CommunityWorks clients and in the process has displaced 6 significant competitors. Cerner has also implemented automated inpatient and outpatient physician and nursing workflows in a 500-bed hospital in Saudi Arabia. Following this implementation, Cerner has now implemented its solutions in 13 hospitals compared to the total of 1 that its competitors have combined.
For Q2, Cerner expects revenues between $790M and $830M where estimates are upwards of $815M. Cerner also expects EPS to come in around $0.39 to $0.40 where estimates are sternly at $0.40. Cerner’s guidance seems weak pending confidence that another wave of EMR purchases is in the near future. According to Cerner, most of the purchases will disproportionately go to Cerner or their main competitor who they have a strong win rate against. Following the release Cerner has been down almost 5% meeting our stop loss price. This major decrease in stock price has mainly been attributed to their light guidance for Q2. Although our thesis remains decently intact, we will be exiting our full position Monday.