Cerner Corporation (NASDAQ:CERN) shareholders are probably feeling a little disappointed, since its shares fell 4.4% to US$70.48 in the week after its latest quarterly results. Revenues were US$1.4b, approximately in line with whatthe analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$1.16, an impressive 121% ahead of estimates. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the current consensus from Cerner's 22 analysts is for revenues of US$5.75b in 2021, which would reflect a satisfactory 3.5% increase on its sales over the past 12 months. Per-share earnings are expected to accumulate 4.0% to US$2.68. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$5.79b and earnings per share (EPS) of US$2.56 in 2021. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.
The consensus price target was unchanged at US$77.82, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Cerner at US$88.00 per share, while the most bearish prices it at US$62.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that Cerner's revenue growth is expected to slow, with forecast 3.5% increase next year well below the historical 5.8%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 19% next year. Factoring in the forecast slowdown in growth, it seems obvious that Cerner is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Cerner following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Cerner analysts - going out to 2024, and you can see them free on our platform here.
It is also worth noting that we have found 1 warning sign for Cerner that you need to take into consideration.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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