Cerner Corp · Company Review · Coronavirus

Company Review: Cerner Corporation

As the COVID-19 is taking a significant toll on life as we know it, there are still the realities that we have an election this year. There is an important decision that this country has to make, and the conversation around healthcare will be front and center. With that being said, I believe some of the companies positioned with a firm footing in information technology also have an excellent opportunity to grow in the upcoming years. One of those companies is Cerner Corporation (CERN), which is an enterprise healthcare technology company. They are in the business of selling software related to the management of health records, health/clinical/laboratory data analytics, and much more.

Company Snapshot
Ticker Symbol: CERN
Current Price: $56.55
52 Week Low: $54.54
52 Week High: $80.90
Dividend (Yield): $0.72 (1.21%)
EPS: 1.65
P/E Ratio: 34.27

 

The Good

I like this company primarily because it has some pretty cool opportunities with government agencies and private corporations to help build a platform that will help develop strategies around sleep apnea and the opioid crisis. They acquired AbleVets last year, which is a platform focused on providing cyber, cloud, and system development solutions for federal agencies. Specifically, they have a contract with the Department of Defense ($5.5 billion) and one with the Department of Veteran Affairs ($16.1 billion).

They are also partnering with ResMed for a cloud-based big data solution that tracks metrics generated by sleep apnea and respiratory devices. This is particularly interesting now that we are facing the COVID-19, which is a virus that requires the infected to utilize ventilators.

The Bad

The competition, Epic Systems Corp, is in alignment with hospitals on a recent adjustment to Health and Human Services rule on data interoperability. Basically, the HHS granted greater access for patients to their healthcare data through application program interfaces (or APIs for those of you techies), so they can allow third parties they choose to see their information. And as I mentioned, some hospitals and their administrations oppose this, but Cerner is for this change. The CEO shared support for this effort indicating that this could be beneficial to Cerner that healthcare IT will allow more flexibility in data sharing. Epic Systems Corp CEO will sue the HHS if this change is moved on, and as a result, the progress of Cerner’s platform development could hang in the balance of the success of the lawsuit.

The Ugly

Their earnings have been decreasing since 2017. They’ve increased spending at a higher rate than what they have recognized revenue. Their expenses have been justified for travel arrangements for consultations with customers and Research and Development, but it’s still making the revenue vs. earnings chart look pretty ugly.

Screen Shot 2020-03-20 at 7.05.53 PM
Yahoo Finance Financials Report

 

I currently hold some shares of the company and plan to hang on to them through the COVID-19 induced bear market. My hope is it gets to about $85/share.

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