In most years, a 2% year-to-date decline for a stock by late April wouldn't be viewed as a good thing. That's what Cerner (NASDAQ:CERN) stock has delivered so far in 2020. But considering the upheaval brought by the COVID-19 pandemic, many investors probably aren't disgruntled with Cerner's performance.

Cerner announced its first-quarter results after the market closed on Tuesday. And the healthcare technology provider gave reasons for shareholders to be both disgruntled and gruntled. Here are the highlights of Cerner's Q1 update.

Healthcare professional holding a tablet with images related to healthcare appearing over the tablet

Image source: Getty Images.

By the numbers

Cerner reported first-quarter revenue of $1.41 billion. This reflected a 2% year-over-year increase. However, it fell short of the average analysts' Q1 revenue estimate of $1.43 billion.

The company announced Q1 net income of $147 million, or $0.47 per share, based on generally accepted accounting principles (GAAP). In the first quarter of 2019, Cerner posted GAAP earnings of $166 million, or $0.51 per share.

However, Cerner's adjusted non-GAAP numbers looked a little better. The company recorded Q1 adjusted earnings of $223 million, or $0.71 per share. This reflected a solid increase from adjusted earnings of $199 million, or $0.61 per share, generated in the prior-year period. It also narrowly topped the consensus Wall Street estimate of $0.70 per share.

Behind the numbers

There were two factors behind Cerner's lower-than-expected revenue in the first quarter. Both of them related to the COVID-19 pandemic.

The company noted that bookings in Q1 totaled $1.09 billion, at the low end of its expectations. It stated that the volume of contracts was lower than normal in the last couple of weeks in March as a direct result of the COVID-19 outbreak. This lower level of bookings weighed on Cerner's Q1 revenue. So did the travel restrictions the company implemented in response to the COVID-19 pandemic.

Cerner's year-over-year decline in GAAP earnings stemmed primarily from a big jump in general and administrative (G&A) expenses. G&A costs soared 45% to $139.9 million. Software development expenses also increased by nearly 3% year over year to $185.3 million. 

Looking ahead

Cerner now anticipates full-year 2020 revenue of between $5.55 billion and $5.7 billion. This is lower than the company's previous guidance of $5.725 billion to $5.975 billion. Cerner expects full-year adjusted diluted earnings per share will be between $2.78 and $2.90. Its previous outlook estimated a range between $3.09 and $3.19.

The company also looks for Q2 revenue of between $1.34 billion and $1.39 billion. Q2 adjusted diluted earnings per share are expected to be between $0.60 and $0.64. Both top- and bottom-line projections are below Cerner's Q1 results and far short of what analysts were expecting.

The culprit behind this disappointing guidance, of course, is the COVID-19 outbreak. Cerner thinks that the worst impact will be felt in the second quarter. However, the company looks for a rebound in the second half of the year. Like all healthcare stocks, though, Cerner faces risks that the COVID-19 crisis could last longer than expected and have a greater impact than expected.