Cerner Q3 Earnings: Can NasdaqGS:CERN Hit Its $0.72 EPS Target?

in EARNINGS/INVESTING IDEAS by

Cerner Corporation (NasdaqGS:CERN) is scheduled to report Q3 earnings results after markets close for trading on October 28, 2020.

The company is expected to report earnings of $0.72/share on revenue of $1.375 billion. The consensus earnings per share (EPS) of $0.72/share is based on a poll of 22 analysts and represents a growth in eps of 8.5% over the same quarter last year, when the company reported earnings of $0.66/share.

The revenue forecast of $1.375 billion based on a poll of 21 analysts implies a year-over-year (YoY) decline in revenue of −3.8%. Last year the company reported $1.429 billion in revenue for the quarter.

Expected to report EPS growth of 8.5% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $1,374.77 $1,429.43 −3.8%
EPS $0.72 $0.66 8.5%

Earnings Call Trends

Historically, management has exceeded analyst expectations 4 out of the last 8 tracked quarters, and met expectations 4 quarters.

What are your expectations from Cerner Corporation for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.61 $0.63 2.7% Beat
Q1, 2020 $0.70 $0.71 1.9% Beat
Q4, 2019 $0.74 $0.75 1.6% Beat
Q3, 2019 $0.66 $0.66 0% Met
Q2, 2019 $0.64 $0.66 2.4% Beat
Q1, 2019 $0.61 $0.61 0% Met
Q4, 2018 $0.63 $0.63 0% Met
Q3, 2018 $0.63 $0.63 0% Met

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price did not react much to the update.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
July 29, 2020 $71.14 $71.26 0.2% Increase
April 28, 2020 $73.30 $71.01 −3.1% Decline
February 4, 2020 $73.17 $78.59 7.4% Increase
October 24, 2019 $67.57 $66.43 −1.7% Decline

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −3.09, the model suggests that the company is not likely to be an earnings manipulator. A value of −3.09 implies a 0.1% chance of earnings manipulation.

Fundamentals And Technical Analysis

Cerner Corporation is currently trading at $72.70/share, up 0.5% for the day. The company is trading at approximately 89.9% of its 52-week high of $80.90/share. The company’s stock price is up 2.0% since the last earnings report and down −2.1% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 50.90 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NasdaqGS:CERN Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 42.85 and a forward P/E multiple of 25.26.

Cerner Corporation’s current share price also implies a price-to-book (P/B) multiple of 5.53. The following table summarizes some other key fundamental ratios:

Data as of October 21, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $72.70
P/E Ratio 42.8x
P/E Ratio (Fwd) 25.3x
PEG Ratio −5.0
Total Debt / Total Capital 6.4%
Levered Free Cash Flow $971.2 million
EV / EBITDA 19.6x

Finbox

Cerner Corporation is a large-cap stock with a market capitalization of $22.201 billion and a total enterprise value of $23.277 billion. The company operates in the Healthcare sector and the Health Care Technology industry.

Cerner Corporation, together with its subsidiaries, provides health care information technology solutions and tech-enabled services in the United States and internationally. The company offers Cerner Millennium architecture, a person-centric computing framework, which includes clinical, financial, and management information systems that allow providers to access an individual’s electronic health record (EHR) at the point of care, and organizes and delivers information for physicians, nurses, laboratory technicians, pharmacists, front- and back-office professionals, and consumers. It also provides HealtheIntent platform, a cloud-based platform to aggregate, transform, and reconcile data across the continuum of care; and CareAware, an EHR agnostic platform that facilitates connectivity of health care devices to EHRs. In addition, the company offers a portfolio of clinical and financial health care information technology solutions, as well as departmental, connectivity, population health, and care coordination solutions. Further, it provides tech-enabled services, such as implementation and training, remote hosting, operational management services, revenue cycle services, support and maintenance, health care data analysis, clinical process optimization, transaction processing, employer health centers, employee wellness programs, and third-party administrator services; and complementary hardware and devices for third parties. The company serves integrated delivery networks, physician groups and networks, managed care organizations, hospitals, medical centers, reference laboratories, home health agencies, blood banks, imaging centers, pharmacies, pharmaceutical manufacturers, employers, governments, and public health organizations. Cerner Corporation was founded in 1979 and is headquartered in North Kansas City, Missouri.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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