There's good news and there's bad news for shareholders of Cerner (CERN) so far in 2020. The good news is that the stock is on a roll, soaring by more than 30% since late March. The bad news is that it's still down by a fraction of a percent year to date and is underperforming the S&P 500 index by about 1%. 

The healthcare information technology specialist announced its second-quarter results after the market closed Wednesday, and here too, there was both good news and bad news for investors.

Male healthcare provider looking at laptop while making notes.

Image Source: Getty Images.

By the numbers

Cerner reported revenue in the second quarter of $1.33 billion, down 7% year over year -- a bit below analysts' average estimate of $1.36 billion. Its GAAP net income of $135 million, or $0.44 per share, reflected improvement from its earnings of $127 million, or $0.39 per share, in Q2 2019.

Its adjusted earnings of $193 million, or $0.63 per share, were down from $215 million, or $0.66 per share, in the prior-year period. However, the result beat the consensus estimate of Wall Street analysts, which was for adjusted earnings of $0.61 per share. In addition, the company reported Q2 bookings of $1.34 billion, more than $100 million above the top of its guidance range.

Behind the numbers

The COVID-19 pandemic was a major factor in Cerner's Q2 revenue decline. Management acknowledged that "the pandemic had a slightly bigger topline impact than expected." As a result, revenue was $10 million under the company's guidance range.

COVID-19 wasn't the only issue impacting Cerner's numbers, though. A big outsourcing contract boosted the company's revenue in the prior-year period. However, that contract ended in the fourth quarter of 2019.

But while the company underperformed on the top line, it was able to beat expectations on the bottom line. In the end, the lower revenue didn't impact earnings much, because the shortfalls came in areas such as technology resale and reimbursed travel that generate low margins anyway.

It also helped that Cerner cut its spending. The company's total operating expenses in the quarter fell nearly 6% year over year to $971.5 million.

Looking ahead

Cerner is forecasting Q3 revenue of between $1.35 billion and $1.4 billion, and projects adjusted diluted earnings per share of between $0.70 and $0.74. The midpoints of both ranges are higher than analysts' average estimates.

The company anticipates full-year revenue will land between $5.45 billion and $5.55 billion. That's lower than Cerner's previous guidance range of $5.55 billion to $5.7 billion, a reflection of its lower-than-expected Q2 revenue, its pending sale of RevWorksSM, and management's revised expectations for the second half of 2020.

In addition, Cerner narrowed its guidance range for 2020 adjusted diluted earnings per share to between $2.80 and $2.88. It previously had offered a range of $2.78 to $2.90. 

The biggest wildcard for this healthcare company will be the COVID-19 pandemic. Management thinks that the impact the coronavirus had on the company in the second quarter was the worst it will cause, and that business will improve in the second half of the year. However, there's still a lot of uncertainty. If the pandemic worsens from here, management's current outlook could prove to be too optimistic.