IQVIA Holdings Rides on Technological Suite Amid Debt Woes

Shares of IQVIA Holdings Inc. IQV have gained 18.7% on a year-to-date basis against 10.1% decline of the industry it belongs to.

 

The company reported solid third-quarter 2018 results wherein both earnings and revenues surpassed the Zacks Consensus Estimate. Adjusted earnings of $1.42 per share beat the consensus estimate by 3 cents and increased 19.3% year over year. Total revenues of $2.59 billion outpaced the consensus mark by $13 million. The top line grew 5.2% year over year on a reported basis and 6.3% on a constant-currency basis.

IQVIA Holdings has an impressive earnings surprise history, having outpaced estimates in each of the last four quarters. It delivered average four-quarter positive earnings surprise of 3.8%.

What’s Driving IQVIA Holdings?

IQVIA Holdings looks strong on the back of its technological suite. The company offers an extensive range of technology solutions in the form of cloud-based applications and related services. The company’s Software as a Service (“SaaS”) solution supports a vast range of clinical and commercial processes.

By combining its database, healthcare expertise and therapeutic information collected from over 100 countries, IQVIA Holdings creates its Global Market Insight offerings such as MIDAS, Analytics Link and Disease Insights. All these solutions and services are used by healthcare and pharmaceutical companies to organize, enhance and implement their clinical and commercial strategies in a coordinated manner. The company secured major wins for its tech offerings in the form of different awards and deals with new and old clients in the first and the second quarters of 2018.

Strategic collaborations such as the agreement with Roche, which includes the deployment and usage of IQVIA commercial technologies globally, partnership with Genomics England to build a real-world research platform, which integrates clinical and de-identified genomics data, and a technology deal with Theramex (a global pharmaceutical company dedicated to women’s health) should help the company strengthen its technological solutions. The recent launch of a Software as a Service (“SaaS”) eConsent tool for use in clinical trials is another major positive.

The company’s efforts to help its clients gain an accurate and deeper understanding of the entire healthcare system and its related processing by providing access to real-world data are appreciable. Such efforts should help the company strengthen its foothold in the real-world business. The company continues to make significant investments in the expansion of its real-world platform and capabilities.

All these factors seem to be working in favor of the company which saw its Technology & Analytics Solutions (TAS) segment revenues increase 12.9% on a reported basis and 15% on a constant-currency basis in third-quarter 2018. The segment delivers critical information, technology solutions and real-world insights and services to life science customers.

Risks

IQVIA Holdings’ balance sheet is highly leveraged. As of Sep 30, 2018, long-term debt was $10.5 billion while cash and cash equivalents were $827 million. Such a cash position implies that the company needs to generate adequate amount of operating cash flow to service its debt. Also, high debt may limit the company’s future expansion and worsen its risk profile.

Further, the company’s global presence makes it vulnerable to foreign currency exchange risk. As of Dec 31, 2017, the company operated approximately 282 offices in almost 83 countries. In 2017, around 41% of IQVIA Holdings’ total revenues were denominated in 55 different currencies other than the U.S. dollar. Thus, any appreciation or depreciation of the dollar versus these foreign currencies could impact the company’s results.

Zacks Rank & Stocks to Consider

Currently, IQVIA Holdings is a Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the broader Zacks Business Services sector are Paychex, Inc PAYX, WEX Inc WEX and Automatic Data Processing Inc. ADP, each carrying a Zacks Rank #2. Long-term expected EPS (three to five years) growth rates for Paychex, WEX and Automatic Data Processing are 8.5%, 15% and 12.5%, respectively.

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