Morningstar | CERN Updated Forecasts and Estimates from 28 Mar 2019
Cerner reported fourth-quarter results that fell slightly short of our expectations and those of consensus, with earnings per share in line and revenue light due to lower-than-expected technology resale revenue. Despite lower-than-expected revenue, earnings came in as expected due to the favorable mix away from relatively lower margins of resale. Guidance was lowered slightly but remains generally in line with our expectations. Following the results, we maintain our $66 fair value estimate and wide moat rating and continue to believe the company benefits from strong switching costs and the entrenchment the firm has in the complex healthcare landscape. Additionally, Cerner announced a plan to initiate a quarterly dividend of $0.15 per share, representing a yield of approximately 1%. We believe investors will welcome this news.For the fiscal fourth quarter, revenue grew 4% year over year to $1.4 billion, while normalized EPS grew 9% year over year to $0.63. License revenue declined slightly year over year, while subscription revenue declined 24% due to timing of deals and the impact from a new accounting revenue standard (ASC 606). Trailing 12-month bookings and deferred revenue increased 6% and 28%, respectively, and came in higher than the 4% revenue growth during that same period, indicating positive business momentum under the surface. Operating margin of 19% decreased from 21% year over year.
Revenue guidance for the first quarter of $1.365 billion to $1.415 billion bracketed consensus and is generally in line with our expectations, while EPS guidance of $0.60 to $0.62 is a penny light in our view. The midpoint for both full-year revenue guidance of $5.65 billion-$5.85 billion and full-year EPS guidance of $2.57-$2.62 are in line to modestly below our and Street expectations.
Cerner designs, develops, markets, installs, hosts and supports health care information technology, health care devices, hardware and content solutions for health care organizations and consumers. The company also provides a range of services, including implementation and training, remote hosting, operational management services, revenue cycle services, support and maintenance, transaction processing, employer health centers, employee wellness programs and third party administrator services for employer-based health plans. The company has two operating segments: Domestic, which includes business activity in the United States; and International, which includes business activity outside the United States.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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