Last week on ValueExpectations.com we highlighted Cerner Corporation (NASDAQ:CERN) as a company that has consistently been able to create wealth for its shareholders and follows what AFG refers to as a “Wealth-Creating Strategy” of growing a profitable business, in other words, the market favors companies that generate positive Economic Margins (true measure of economic profitability) and are capable of expanding their business.
Cerner Corporation supplies healthcare information technology (HIT) solutions, healthcare devices and other services designed to optimize healthcare organizations with solutions focused on eliminating medical errors, variability, and waste along the healthcare value chain. CERN’s business is conducted globally (North and South America, Europe, the Middle East, and Asia Pacific) with a customer base of more than 8,500 facilities, which include hospitals, doctor practices, ambulance centers, home health facilities and retail pharmacies. The HITECH Act portion of the 2009 Stimulus Bill will serve to propel the trend for seamless connectivity of individual electronic health records (EHR) in the U.S. because it provides incentives for hospitals and doctors’ offices to implement HIT systems over the next few years. CERN’s backlog recently jumped 21% to $4.3 billion in Q1 10, which represents more than 2x expected annual sales in 2010. About one-third of the backlog is expected to be recognized as sales in 2010. The majority of the backlog reflects new business booking and provides good visibility into CERN’s sales strength. We believe CERN’s shares are attractively priced.
• On April 28, CERN announced a partnership agreement with CareFusion to integrate the companies’ proprietary technologies and develop an HIT adaptor. CareFusion’s Pyxis automated dispensing system will now have CERN’s CareAware device-connectivity architecture. The partnership is designed to improve systems of dispensing medications. In addition, the companies hope to combine patient electronic health records (EHR) with medication management as well as with pharmacy and surgery information.
• CERN is among the top 2 companies that will benefit from the long-term focus on EHR and HIT connectivity. One recent example of how CERN promises to cut its customers’ costs and improve quality is the May 4 announcement that Fort HealthCare in Wisconsin will implement Cerner Millennium to connect a Fort Atkinson hospital with doctors’ offices, clinics, employers and consumers.