Activist investor says Cerner can grow margins 9% in next 18 months

Although Cerner shares have seen a double digit increase this year — 20 percent — the EHR developer is expected to see even bigger growth, activist investor Jeff Smith, CEO of Starboard Value, told CNBC.

Earlier this month, Starboard extended its relationship with Cerner. Per the agreement, Cerner overhauled part of this board of directors and set forward a path of organizational changes. Cerner plans to eliminate its president role and focus on reducing operating expenses.

According to Mr. Smith's calculations, Cerner can expand its operating margins by 3.5 percent if it meets certain targets. He also estimates Cerner's operating margins could increase by 9 percent over the next 18 months with the strategic improvements being made.

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