Cerner (CERN) Could Miss and Guide Down Tues - Stifel

Steven Rubis from Stifel reduced revenue estimates on Cerner (NASDAQ: CERN) ahead of earnings scheduled for Tuesday after the close. He is concerned about the slowing organic growth and believes it could cause investors to become more cautious on the name going forward.

Based on CPSI’s 3Q15 results, it is possible that there is a deflationary environment associated with CMS reimbursement reform, mostly in the form of investment fatigue among the small, community hospital space.

In 4Q14, both CPSI and MDRX discussed a lull in the market associated with fatigue around MU investment. CPSI missed and lowered its FY15 financial guidance in each of the quarters, 1Q15 – 3Q15. Cerner missed and lowered in both 1Q15 and 2Q15 and these patterns suggest that CERN may face another weak result and possible guidance reduction after the close on Tuesday.

When you subtract the contribution from Siemens Health Services Cerner’s organic revenue grew at 4.5% and 1.7% in 1Q15 and 2Q15. Estimates for the rest of the year have 5% organic growth baked in leaving a gap if the business has not reaccelerated.

Stifel reduced its 3Q15 revenue estimates to better reflect a more modest organic growth rate. His estimates are $1,151.4 million and $0.55 in Cash EPS vs. consensus of $1,170.7 million and $0.54 . No change to the Sell rating and $50 PT.

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 $66.29 yesterday.

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