Cerner (CERN) Bookings Miss, Buy Weakness - FBR

FBR Capital analyst, Steven Halper, maintained his Outperform rating and $73 PT on Cerner (NASDAQ: CERN) despite bookings coming in lighter than expected. He believes the timing of two large deals is to blame rather than demand or pricing pressure making the 13% post market sell off a buying opportunity.

Cerner reported 4Q15 results after the market close on Tuesday, February 16. Revenue was essentially in line and EPS were slightly ahead of expectations. Bookings for 4Q15 were $1.35 billion compared with previous guidance of $1.45 billion to $1.55 billion. Two large service contracts did not close as expected. Bookings guidance for 1Q16 is probably another area of concern, but 1Q15 bookings grew 32%, which is a very difficult comparison.

Cerner reported bookings of $1.35 billion, representing 16% year-over-year growth. Guidance was $1.45 billion to $1.55 billion. For the first three quarters of 2015, Cerner consistently beat bookings but did not receive much credit, given the top-line misses. Bookings for 1Q16 are expected to be $1.15 billion to $1.20 billion. The midpoint of this range represents a decline of 2%. The company faces a tough comparison, as there were $200 million in ITWorks/RevWorks contracts signed.

Two key items for investors to focus on:

1) Management indicates that 79% of 2016 revenue will come from backlog. This is a higher level than in previous years (low-70% range), given the large amount of long-term contracts that the company has signed in recent years.

2) Perhaps most important, the company reconfirmed that it still plans to grow the top line annually in the double-digit range. With this statement, the analyst believes the bookings disappointment was simply a one-time miss and not indicative of a fundamental change in the company's growth profile.

For an analyst ratings summary and ratings history on Cerner click here. For more ratings news on Cerner click here.

Shares of Cerner closed at $55.46 yesterday.

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