NEW DIRECTIONAL CALL PLAYS
Cerner Corp. - CERN - close: 64.53 change: +0.72
Stop Loss: 62.35
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.7 million
Entry on November -- at $---.--
Listed on November 13, 2014
Time Frame: 8 to 12 weeks
New Positions: Yes, see below
Why We Like It:
CERN is part of the technology sector. The company sells healthcare information technology solutions. According to a company press release,
"Cerner's health information technologies connect people, information and systems at more than 14,000 facilities worldwide. Recognized for innovation, Cerner solutions assist clinicians in making care decisions and enable organizations to manage the health of populations. The company also offers an integrated clinical and financial system to help health care organizations manage revenue, as well as a wide range of services to support clients' clinical, financial and operational needs. Cerner's mission is to contribute to the improvement of health care delivery and the health of communities."
CERN's most recent earnings report was October 23rd. The results bottom line results were in-line with estimates and the revenue number was a miss. Yet these headlines don't tell the whole story. Analysts were expecting CERN to deliver a profit of $0.42 a share on revenues of $857 million.
The company met the EPS number of 42 cents but that's a +20% improvement from a year ago quarter. Revenues were only $840 million, which missed Wall Street's estimate but revenues still grew +15.4%. The company's last quarter saw a record $1.1 billion in bookings, the most ever for a third quarter.
CERN is very profitable. Their gross margins are above 80%. CERN's backlog soared +21% to $10.16 billion. It was a pretty good quarter considering they also announced on August 5th they were buying Siemens Health Services for $1.3 billion. This deal has already been approved by the U.S. FTC and should close in February 2015.
CERN's Q4 guidance expects revenues to grow +13% from a year ago to $880-915 million. Adjusted diluted earnings per share should come in the $0.46-0.47 range. New bookings are expected to hit the $1.15-1.25 billion zone. All of these show additional growth but they're largely in-line with analysts' estimates.
The stock has seen a significant bounce from its October low and the late October rally produced a breakout past its 2014 high. Now CERN has spent about two weeks digesting its gains and it's starting to breakout again. Today saw shares outperform the broader market and close above short-term resistance at $64.00.
More aggressive traders may want to buy calls now. We are suggesting a trigger to buy calls at $65.10.
Trigger @ $65.10
- Suggested Positions -
Buy the 2015 Jan $65 call (CERN150117c65) current ask $1.95
Option Format: symbol-year-month-day-call-strike