Cerner News Cheers Investors

KANSAS CITY – Analysts are bullish after the investors meeting held Thursday by Cerner, the Kansas City maker of EMR and CPOE systems.

"Overall we walked away with a greater level of conviction that Cerner 'gets it,' and will continue to gain marketshare in a rapidly evolving industry," wrote Piper Jaffray research analysts Sean W. Wieland and Mohan A. Naidu, who reiterated their "overweight rating" and $98 price target for the health IT giant.

The pair were encouraged by the growth that could be afforded by ARRA funding – monies disbursed both to Cerner itself and its provider clients – noting that the company "still expects to see a lot of opportunities from the stimulus. Specifically, their base of customers should receive about $8 billion in stimulus funds, and the company expects to see about $2 billion of this."

Cerner expects that "there will be about 2,200 CPOE decisions," the analysts continued, "and about 1,250 of those are greenfield with no existing clinical system. Most of those are critical access hospitals with [fewer than] 100 beds. During the CIO panel, we learned that there is very little chance of the timeline getting pushed out (in contrast to recent reports)."

Moreover, Wieland and Naidu were pleased that Cerner execs offered "a glimpse of growth opportunities beyond the stimulus, and numerous opportunities that could drive upside to numbers." Management expressed intent to "grow operating margin by at least 100 basis points per year on double digit revenue growth," they wrote. "We interpret that as a worst case scenario, not guidance."

Finally, the analysts expressed optimism about the company's plans for global growth, writing that president Trace Devanny's recent relocation to London "tells us that Cerner's commitment to international expansion is real," and noting Devanny's indication that the company feels "global opportunity eclipses domestic opportunity."

Specifically, the pair mentioned some Cerner projects in France due to be completed later this year, "which we believe will be a catalyst for international revenue growth in 2010. In our view, if the company can get international revenue to return to 2008 levels, it would likely drive upside to numbers."

Cerner (CERN) stock closed at $85.15 on Thursday, up from $41.48 on the same date last year.

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