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A month has gone by since the last earnings report for IQVIA Holdings (IQV). Shares have lost about 0.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is IQVIA due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
IQVIA Surpasses Q3 Earnings & Revenues Estimates, 2020 View Up
IQVIA Holdings reported solid third-quarter 2020 results, wherein the company’s earnings and revenues surpassed the Zacks Consensus Estimate.
Adjusted earnings per share of $1.63 beat the consensus mark by 8% and improved 1.9% on a year-over-year basis. The reported figure was above the guided range of $1.47-$1.55.
Total revenues of $2.79 billion outpaced the consensus estimate by 1.3% and increased 0.6% year over year on a reported basis but were down 0.1% on a constant-currency basis. The reported figure came above the guided range of $2.73-$2.78 billion.
Revenues from Technology & Analytics Solutions totaled $1.21 billion, up 10.2% on a reported basis and 9.2% on a constant-currency basis. The segment accounted for 43% of total revenues.
Research & Development Solutions’ revenues of $1.40 billion decreased 4.5% on a reported basis and 5.1% on a constant-currency basis. The segment contributed 50% to total revenues.
Revenues from Contract Sales & Medical Solutions totaled $179 million, down 13.9% on a reported and 14.4% on a constant-currency basis. The segment accounted for 6% of total revenues.
Adjusted EBITDA was $604 million, up 1.9% year over year. Adjusted EBITDA margin grew to 21.7% from 21.4% in the year-ago quarter.
Operating income was $187 million, down 8.3% from the year-ago quarter. Operating income margin decreased to 6.7% from 7.4% in the year-ago quarter.
Balance Sheet and Cash Flow
IQVIA exited third-quarter 2020 with cash and cash equivalents balance of $1.46 billion compared with $1.11 billion at the end of the prior quarter. Long-term debt was $12.2 billion compared with $11.9 billion at the end of the prior quarter.
The company generated $574 million of cash from operating activities in the reported quarter and CapEx was $157 million.
Considering the consistent demand for its offerings, solid liquidity, and strong free cash flow performance, IQVIA reinstated its share-repurchase program, which it had suspended in the wake of the pandemic. As of Sep 30, 2020, the company had nearly $1.0 billion of share-repurchase authorization remaining.
Fourth-Quarter 2020 Guidance
IQVIA expects fourth-quarter revenues in the range of $3.04-$3.19 billion. The current Zacks Consensus Estimate of $3.02 billion lies below the guidance.
Adjusted earnings per share are expected to be between $1.93 and $2.03. The current Zacks Consensus Estimate of $1.95 lies within the guidance.
Adjusted EBITDA is anticipated between $685 million and $710 million.
IQVIA raised its full-year guidance. The company now projects adjusted earnings between $6.25 and $6.35 compared with the prior guidance of $6.10 and $6.30 per share. Revenues are now expected between $11.1-$11.25 billion compared with the prior guidance of $11 billion and $11.1 billion. Adjusted EBITDA is now anticipated between $2,335 million and $2,360 million compared with the prior guided range of $2,295 - $2,345 million.
For full-year 2021, IQVIA expects revenues in the range of $12.3-$12.6 billion. Adjusted earnings per share are expected to be between $7.65 and $7.95. Adjusted EBITDA is anticipated between $2.725 billion and $2.800 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
At this time, IQVIA has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, IQVIA has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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