Analyst Note| Soo Romanoff |
Wide-moat Cerner reported fourth-quarter results that were largely as expected. Revenue was slightly short of our expectations, which were on the high end of consensus (as listed by FactSet), with the larger-than-expected impact of divested businesses. Government contracts remain the core strength of the company’s growth strategy (about 15%) and are offsetting notable declines in the core business. The company is going through a notable shuffling of its executive team; emphasis remains on simplifying and improving the mix of services to better match the times by acquiring new technologies. We have already started to see improvements in mix and resulting increases in profitability. In reflecting these better results and fiscal 2021 guidance, we have increased our fair value estimate to $86 per share from $78.