Notes from Cerner's earnings call

Cerner’s 2Q09 earnings were $43.7 million, up 23.8% from 2Q08, and diluted earnings per share of $0.52, up 23.8% from a year ago, however coming short of analysts’ estimate of $0.551. Bookings in the second quarter came in strong at $394.0 million, with a total revenue backlog of $3.7 billion, up 12% over the year-ago period. New bookings included 19 contracts over $5 million, 9 of which are worth over $10 million a project.

Cerner said that the market place is still very conservative. Companies are building up their cash balances to enhance their balance sheet so they can secure better financing options in the current market conditions. In addition, uncertainty in health care reform contributes to conservative spending.

System initiations are coming in at slower rate than they would have liked, and uncertainty surrounding the health care reform is preventing many hospitals and doctors offices from being proactive. Cerner remains very cautious still on 2009, yet at the same time they expect the second half of 2009 to show a clear picture of what the future holds for the healthcare system, and possibly some benefits realized in 2010.

Cerner will benefit from Stimulus money flowing into hospitals who then will use the money to buy Cerner’s products and services. The company also sees opportunities with their existing customers that have adopted only certain areas like electronic billings, but have yet to adopt electronic medical records or computerized order entry systems. It will largely depend on what “meaningful usage” will be defined by healthcare reform legislation. With breadth and depth of Cerner’s product line and its ability to work with client needs, Cerner will be a major beneficiary of stimulus money flowing through the industry.

Cerner certainly is putting a lot of hope into future earnings. The company anticipates second half earnings to compensate for rather weak first half earnings due to the “spend it or lose it” nature of hospital budget spending. They also expect a clearer picture of the reform will boost demand for their product. Even though it sounds like they keep pushing their promises to a later date every quarter, it is reasonable. It is hard not to think that this is the path we are going to, validating hope with some reason.

Cerner lowered their full 2009 revenue outlook to $1.7 to $1.75 billion from $1.75 to $1.8 billion, but kept their diluted earnings per share before stock options unchanged at $2.40 to $2.50.

CERN is currently changing hands at $64.86, coming in at flat from yesterday’s closing price, erasing most of after market loss after the earnings announcement.