Cerner offers a more conservative outlook after a bumpy 2016

Coming off a bumpy year marked by missed expectations, Cerner executives on Thursday offered a more conservative outlook for the health care technology business this year.

Growth will come for the giant Kansas City-area employer, just not as fast as in the past and probably not as fast as in the future. Analysts have noted that Cerner missed its own revenue forecasts in five of its previous seven quarters.

“We can’t predict the future,” chief financial officer Marc Naughton told analysts Thursday. “If we did, we did a bad job of it in ’15 and ’16.”

Cerner’s guidance for 2017 results reflect “a little bit tighter look at things,” he said, and an effort to “balance things a little bit more toward the side of conservatism.”

The North Kansas City-based company expects revenues and earnings to each grow roughly 9 percent this year. Bookings, which are the source of future revenues and profits, should grow 9 percent in the first quarter of the year. Cerner doesn’t offer full-year guidance on bookings.

One analyst felt compelled to ask: Are the days of double-digit growth over?

No. It could even happen this year within the guidance range that Cerner offered. And future years look brighter on that front as efforts to land big deals this year should generate results next year and beyond.

One place where Cerner delivered less than expected last year was in landing big contracts with its ITWorks outsourcing service. President Zane Burke said health care clients fared better financially than expected, which reduced the pressure on them to cut costs by outsourcing work to Cerner. But they will at some point.

“We continue to grow the pipeline in that space and continue to move opportunities along,” Burke said. “We see that those are going to close in the upcoming year.”

Naughton said work in both areas are part of Cerner’s effort to target double-digit growth in the future.

“As we start getting those into the fold, certainly I foresee times in the future when we can have double-digit revenue growth,” Naughton said.

Not every year, he added, but the 9 percent growth projected for this year is pretty close and pretty good for a $5 billion business.

The executives spoke with analysts after announcing that profits fell by 9.9 percent in the waning months of 2016 but still increased for all of 2016. Bookings of new business in the quarter were flat from a year earlier.

Cerner earned $149.7 million in October, November and December, or 44 cents a share. A year earlier, it earned $166.1 million, or 48 cents a share, in its fourth quarter.

One added cost in the quarter was $36 million from the “voluntary separation” program it had announced in November.

Bookings totaled $1.44 billion, an increase of 7 percent for the quarter compared with a year ago. Revenues were $1.26 billion, also a 7 percent increase.

For all of 2016, Cerner earned $636.5 million, compared with $539.4 million in 2015. Its revenues last year were $4.8 billion, up 8 percent from 2015.

In its guidance for 2017, Cerner said its revenues should range between $5.1 billion and $5.3 billion, or just under 9 percent growth at the midpoint of that range. Earnings per share are expected to range between $2.44 and $2.56, or a 9 percent increase at the midpoint.

Bookings will be between $1.25 billion and $1.275 billion in the first quarter, a 9 percent growth rate at the midpoint.

This story was originally published February 9, 2017 at 3:55 PM with the headline "Cerner offers a more conservative outlook after a bumpy 2016."