Cerner's First Bookings Miss Since '08 Has Analysts Mixed

The market punished healthcare information technology supplier Cerner Corporation (NASDAQ: CERN) Wednesday after the company reported a fourth-quarter bookings miss in a quarterly report issued at market close Tuesday.

The company missed a bookings benchmark with $1.35 billion, falling short of its own guidance of $1.45–1.5 billion. Despite that miss, the firm beat consensus on earnings and revenue, with $1.175 billion in sales against a Street figure of $1.174 billion and earnings of $0.61 versus estimates of $0.57. Even accounting for a $0.03 per share R&D tax credit, Cerner beat expectations.

Related Link: Oppenheimer Maintains Outperform On Cerner, Lowers PT To $67.00

'Enthusiastic Buyers'

Piper Jaffray analyst Sean Wieland was bullish on the stock, even after lowering his price target from $82 to $70. Wieland wrote that he "can't remember the last time Cerner missed bookings guidance," explaining the company's current market weakness as "ironic" given that investors have shrugged at bookings beats before when other figures came up short.

For reference, however, Cerner last missed bookings in the fourth quarter of 2008.

Wieland focused on another metric he thinks was lost in the "bookings noise," a licensed software sales growth of 25 percent. He called software sales the "headwaters" from which all Cerner sales flow, and that the incoming sales indicates the company will be in good shape as competitors sunset their current programs at the end of this product cycle.

Wieland lowered the company's EPS estimate from $2.35 to $2.33 for 2016.

Growth Aspirations 'Called Into Question'

SunTrust analyst Sandy Draper did not have such a rosy picture of Cerner. She wrote that Cerner's bookings miss "will call into question for some investors the double digit top line growth aspirations the company has through 2020."

Draper had other concerns about revenue visibility for the coming year, noting that the stepped-down revenue guidance the company provided was a bad look. Cerner lowered its full year guidance from "over $5 billion" to $4.9–5.1 billion, which is "another point of issue that may raise questions regarding CERN's visibility into revenue growth potential. Backlog coverage of ~80 percent should give the company visibility for this year. But a slowdown in bookings could make sustaining double digit top line growth in 2017 a challenge."

UBS analyst Steven Valiquette wrote a quick headline on Cerner, warning, "Let's not throw the baby out with the bathwater." He maintained a Buy rating, but lowered his price target from $75 to $68.

Cerner closed Wednesday at $52.81.

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