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IQVIA Holdings Rides on Technological Suite, Debt Woes Persist

Zacks Equity Research

Shares of IQVIA Holdings Inc. IQV have gained 38.6% in the past year, outperforming the 14.6% rise of the industry it belongs to.

 

Recently, the company reported solid fourth-quarter 2018 results wherein the company’s earnings and revenues surpassed the Zacks Consensus Estimate. Adjusted earnings of $1.50 per share beat the consensus mark by 3 cents and increased on a year-over-year basis. Total revenues of $2.68 billion outpaced the consensus estimate by $71.9 million and increased 6.6% year over year on a reported basis and 8.1% 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 2.7%. Over the past 60 days, the Zacks Consensus Estimate for first-quarter 2019 earnings has been revised 2.2% upward.

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.

The company secured major deals for its tech offerings from new and old clients in 2018. Its strategic collaborations include an agreement with Roche for the deployment and usage of IQVIA commercial technologies globally; a 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).

IQVIA Holdings is also focused on enhancing its product portfolio through multiple launches. The company recently launched IQVIA Biotech, aimed at serving small biotech and biopharma companies through integrated clinical and commercial solutions. Two new site portal technology capabilities have been unveiled to streamline clinical trial communications.

Previously, the company launched a SaaS eConsent tool for use in clinical trials and developed SaaS safety platform, aimed at lowering cost and complexity of pharmacovigilance and enhancing an organization’s focus on patient safety.

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 12.4% on a reported basis and 12.1% on a constant-currency basis in 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 Dec 31, 2018, long-term debt was $10.9 billion while cash and cash equivalents were $891 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, 2018, the company operated approximately 307 offices in almost 84 countries. In 2018, around 40% 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 carries a Zacks Rank #3 (Hold). 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 Omnicom OMC, Robert Half RHI and Automatic Data Processing ADP. While Robert Half sports a Zacks Rank #1, Omnicom and Automatic Data Processing carry a Zacks Rank #2 (Buy).

Long-term expected EPS (three to five years) growth rate for Omnicom, Robert Half and Automatic Data Processing is 6.9%, 8.4% and 12.8%, respectively.

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