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Can Cerner (CERN) Deliver a Beat this Earnings Season?

Cerner Corporation CERN is scheduled to report second-quarter 2017 results on Jul 27, after market close. Based in North Kansas City, MO, the company provides healthcare information technology (HCIT) solutions worldwide. Cerner has a stellar four-quarter average earnings surprise of 0.97%.

Last quarter, Cerner reported adjusted earnings of 56 cents per share, beating the Zacks Consensus Estimate of 53 cents. Notably, earnings improved from 49 cents in the year-ago quarter. The company reported net revenues of $1.260 billion, beating the Zacks Consensus Estimate of $1.226 billion. Meanwhile, revenues rose from $1.138 billion in the year-ago period.

Delving deeper into the fundamentals of the stock, let’s see how things are shaping up prior to this release.

Why a Likely Positive Surprise?

Our proven model shows that Cerner is likely to beat earnings because it has the right combination of the two key ingredients.

Zacks ESP: Earnings ESP for Cerner is +1.75% as the Most Accurate Estimate stands at 58 cents, while the Zacks Consensus Estimate is pegged at 57 cents. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter

Zacks Rank: Cerner currently carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings. Conversely, Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement.

The combination of Cerner’s Zacks Rank #3 and positive ESP makes us reasonably confident of a positive earnings surprise this season.

Cerner Corporation Price and EPS Surprise


Factors to Consider

View Upbeat: We believe Cerner’s strong sales performance, solid portfolio and strategic initiatives have positioned it for stellar growth. For second-quarter 2017, the company forecasts revenues between $1.265 billion and $1.335 billion. Adjusted earnings are now expected in the band of 60 cents to 62 cents per share. For full-year 2017, management expects revenues between $5.100 billion and $5.300 billion. Cerner currently forecasts 2017 adjusted earnings in the band of $2.44 and $2.56 per share.

Development of Electronic Health Records System: Cerner announced that it has been chosen by the U.S. Department of Veterans Affairs to develop an electronic health record (EHR) system. Department of Veterans Affairs will use the same system the company is developing for the U.S. Department of Defense, which began its operation at its first site in February.

This system will facilitate the exchange of data between military care facilities and civilian health providers, where current and former service members receive care.

Stable Estimate Revision Trend: For the current quarter, one analyst moved south, compared to no upward revision in the last two months. The Zacks Consensus Estimate for earnings per share is stable at 57 cents over the same time frame.

Robust Portfolio: We believe that Cerner’s strong product portfolio will help boost its customer base. The frequent contract wins reflect growing traction. Furthermore, the company has strong growth opportunities in the revenue cycle management (RCM) and ambulatory space.

Solid Global Foothold: Cerner is one of the largest pure-play HCIT companies and its wide footprint, large reference-able client base and composite array of solutions make it an ideal candidate for investors seeking an exposure to the HCIT industry. Cerner offers an exposure to worldwide healthcare automation. Its international operations provide a more diversified revenue stream. In the past, the company has won contracts in the U.K. as well as in the Middle East. The company has also been working with client organizations globally, to a focus on its population health management profile.

Other Stocks that Warrant a Look

Here are a few other companies you may want to consider as our proven model shows that they also have the right combination of elements to post an earnings beat this quarter:

Becton, Dickinson and Company BDX has an Earnings ESP of +0.41% and a Zacks Rank #2. You can see the complete list of today’s Zacks Rank #1 stocks here.

Align Technology, Inc. ALGN has an Earnings ESP of +1.37% and a Zacks Rank #1.

Stryker Corporation SYK has an Earnings ESP of +0.66% and a Zacks Rank #2.

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