Is Cerner Still A Growth Company?

Shares of Cerner Corporation CERN were in the red following weak full-year outlook, but that doesn’t deter Jefferies and Cantor Fitzgerald from changing their bullish thesis on the stock.

Despite in-line results, Cerner cut its 2017 revenue outlook to $5.1 billion to $5.3 billion from $5.2 billion to $5.45 billion, to reflect lower license revenue as more revenue shifts to a SaaS model. The company slashed its margin outlook to flat to slightly higher from 50-100 bps growth.

Given the lower margin outlook, the company trimmed its 2017 adjusted EPS guidance to $2.44 to $2.56 from $2.50 to $2.70.

However, Sean Dodge of Jefferies says both fourth quarter bookings and revenue were in line, which he views as a win given the recent macro hospital spending concerns and spate of guidance misses. Dodge maintained his Buy rating on the stock, but lowered his price target by $2 to $63.

Dodge highlighted that the company remains confident that it would continue to grow bookings. Specifically, it expects strong 2017 contributions from EHR replacements, revenue and its Works businesses, which Cerner is expecting to hit the 'tipping point' with its population health offerings.

“We continue to believe sufficient opportunity remains both in- and outside of Cerner's client base to drive 9-10% bookings growth over the LT,” Dodge wrote in a note.

In the same vein, Steven Halper of Cantor Fitzgerald reiterated his Overweight rating as he's not too concerned with the guidance cut.

Halper says Cerner is still a growth company.

“Given the investment in software (specifically population health) and other service areas, we believe that Cerner is still capable of long-term top line growth of 8-10%, mid-teens bottom line growth and improving free cash flow,” Halper wrote in a note.

The analyst noted that the shares do not adequately reflect this mostly conservative outlook.

Shares of Cerner fell 4.46 percent to $51.47.