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Will Cerner hit US$80 with a new CEO?

Healthcare IT provider Cerner may be set for a fresh roadmap once it appoints a replacement chief executive officer, JPMorgan’s research team says.

  • Cerner Corp (Nasdaq: CERN) share price dips to US$76.50 per share
  • Its chief executive Brent Shafer will step down once a successor is named
  • The share repurchase plan may unlock value for shareholders, analysts believe
  • Buy and sell Cerner stocks with an IG account

Cerner stock price: What’s the latest?

Shares of US health tech giant Cerner - whose products include electronic health record (EHR) software and analytics - lost 0.4% to close at US$76.50 on Monday (17 May 2021).

As the Missouri-based company searches for a chief executive officer to replace Brent Shafer, all eyes are on how the new leadership would steer the firm.

Shafer is the second key executive to announce their departure in the last six months, with former chief financial officer Marc Naughton leaving late last year. Deutsche Bank’s research team said Cerner is going through a ‘corporate maturation process, prodded along by some activist-type investors’.

Analysts stayed largely positive on CERN shares, with 12 recommending ‘buy’, eight suggesting ‘hold’, and two giving ‘sell’ calls. Their average target price was US$81.19, Bloomberg data showed.

Who will helm Cerner next?

The board as well as Shafer, who is chairman and CEO, have started the process to identify the next CEO.

Shafer will serve in both roles until the board has appointed a successor. After that, he will serve as a senior adviser for a year.

SVB Leerink’s research team believes that a new operations-focused CEO could bring tailwinds, although the transition period ‘may present a delay to CERN’s operational improvement initiatives’.

With fresh eyes on the business, including from chief financial officer Mark Erceg who joined this February, a new roadmap will likely emerge, and ‘we look forward to seeing how the strategy evolves’, JPMorgan analysts said. They rated CERN 'neutral’ with a US$74 target price.

What’s in store for Cerner in the coming quarters?

The medical software provider’s revenue inched down by 2% year-on-year to US$1.39 billion in the first quarter this year, due to the impact of divestitures and the Covid-19 pandemic, Cerner reported this month.

The top-line performance was ‘a little soft’ as it was just shy of the US$1.40 billion Wall Street predicted, although Cerner’s adjusted earnings per share (EPS) of US$0.76 beat analysts’ expectations of US$0.74, noted Deutsche Bank.

For the second quarter this year, analysts forecast Cerner to report revenue of US$1.44 billion and adjusted EPS of US$0.76, according to estimates compiled by Bloomberg.

Management said that moving forward, the firm will focus on engaging consumers and care settings outside the hospital, and seek to improve shareholder returns.

Cerner also announced a new share repurchase programme to buy back up to US$3.75 billion through end-2023.

Deutsche Bank analysts believe the company ‘has multiple levers to offset the deterioration in its core business, and the cost optimisation efforts and incremental share repurchase plan could further unlock some value for shareholders’.

They maintained ‘buy’ on CERN and upped their target price to US$81.

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