CFO purchases can be extremely informative insider transactions. CFOs have considerable insights into their firms’ financial health and some studies have found that these insiders earn higher abnormal returns following their purchases of company shares than CEOs.
In this report, we are going to highlight some interesting CFO buying activity at Cerner Corp (CERN:US). Cerner is a US technology company that provides solutions to the healthcare industry. Its solutions enable its customers to make informed decisions for better management of operations, while arming clinicians with the information they need to provide smarter care. The company is listed on the NASDAQ Global Select Market and currently has a market capitalization of $22.1 billion.
Cerner Corp: Insider Buying
Our records show that since 22 February, Cerner’s new CFO Mark Erceg has purchased stock on nine occasions. Overall, the insider has bought 31,963 shares, spending a total of around $2.25 million on Cerner stock.
Aggressive Insider Trading
It’s not unusual for a new CFO to buy stock. Often, a stock purchase is part of the terms of employment. However, this insider trading activity looks like more than that. The fact that Erceg has now made nine purchases within the space of a few weeks and spent over $2 million on stock suggests that the insider sees a genuine investment opportunity here.
It’s worth noting that Erceg – who has now served as CFO at four public companies – has passed all three Chartered Financial Analyst (CFA) exams. He also has an MBA in Finance. So, he is likely to know what he is doing.
Solid Growth Outlook
Cerner recently posted a solid set of fourth-quarter and full-year results. For the quarter, revenue was up 1% (excluding divestitures) while adjusted diluted EPS were $0.78, in line with the company’s expectations and up 4% compared to $0.75 in Q4 2019. For the year, revenue was up 1% while adjusted diluted EPS came in at $2.84 versus $2.68 in 2019.
Looking ahead, the company said that it has a “solid growth outlook” and that it expects full-year 2021 earnings to be between $3.10 and $3.20.
“As a result of our progress in 2020, we enter 2021 well-positioned to deliver increased value to our clients while also driving profitable growth for shareholders,” commented Brent Shafer, Chairman and CEO.
In light of this outlook, we see the insider buying from the CFO here as a bullish signal.