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Syneos Health (SYNH) Tops Q4 Earnings and Revenue Estimates

Zacks Equity Research

Syneos Health Inc. SYNH reported fourth-quarter 2019 adjusted earnings per share (EPS) of $1.03, which beat the Zacks Consensus Estimate by 1.9%. The metric also improved 8.4% from the year-ago figure.

Reported EPS was 86 cents, marking an improvement of 9.5% from the year-ago number.

For 2019, adjusted EPS came in at $3.23, up 12.5% from the year-ago period. The bottom line beat the Zacks Consensus Estimate by 0.6%.

Revenues in Detail

Service revenues in the quarter totaled $1.21 billion. The top line rose 6.1% year over year, beating the Zacks Consensus Estimate by 1.7%.

For 2019, revenues totaled $4.67 billion, up 6.4% year over year. The top line surpassed the Zacks Consensus Estimate by 0.2%.

Segmental Details

The Clinical Solutions segment recorded service revenues of $899.3 million in the fourth quarter, up 9.5% year over year (adjusted revenues were up 9.7% at CER). The upside resulted from net new business growth. However, an adverse impact of foreign currency fluctuation offset revenue growth.

Syneos Health, Inc. Price, Consensus and EPS Surprise

 

Syneos Health, Inc. Price, Consensus and EPS Surprise
Syneos Health, Inc. Price, Consensus and EPS Surprise

Syneos Health, Inc. price-consensus-eps-surprise-chart | Syneos Health, Inc. Quote


Commercial Solutions revenues were $313.7 million in the reported quarter, down 3.3% year over year (adjusted revenues moved down 3.4% at CER). The decline was caused by project cancellations and delays in 2019 and a reduction in medication adherence revenues.

Margin Details

Direct cost (excluding depreciation and amortization) rose 6.2% to $927.9 million in the quarter. Gross margin contracted 22 basis points (bps) to 23.5%.

Selling, general and administrative expenses rose 2.3% year over year to $112.4 million.

However, adjusted operating margin (excluding depreciation, amortization, transaction and integration-related, and restructuring and other expenses) expanded 11 bps from the year-ago quarter to 14.2%.

Financial Details

Syneos Health exited 2019 with cash and cash equivalents, and restricted cash of $163.7 million compared with $155.9 million at the end of 2018. Cumulative cash flow from operating activities at the end of 2019, was $318.5 million compared with $303.4 million a year ago.

Guidance Updated

For 2020, the company reaffirmed the service revenue guidance at $4.88-$5 billion. The Zacks Consensus Estimate for the same is pegged at $4.94 billion.

For 2020, Syneos Health reaffirmed the adjusted EPS view at $3.58 to $3.78. The Zacks Consensus Estimate for the same is pegged at $3.66.

Our Take

Syneos Health exited the fourth quarter of 2019 on a solid note. We are upbeat about the strong year-over-year revenue growth at the Clinical Solutions segments. The company has been strengthening its unique end-to-end market position by consistently innovating and expanding its Syneos One product. Strong RFP flow, a diverse portfolio of clinical and commercial initiatives and sustained customer interest in Syneos Health’s integrated offerings buoy optimism. The expansion in adjusted operating margin is encouraging as well. However, the contraction in gross margin and decline in Commercial Solutions revenues are worrying.

Zacks Rank

Syneos Health currently has a Zacks Rank of 3 (Hold).

Earnings of Other MedTech Majors at a Glance

Some better-ranked stocks, which reported solid results this earnings season, are Stryker Corporation SYK, Accuray Incorporated ARAY and AmerisourceBergen ABC.

Stryker delivered fourth-quarter 2019 adjusted EPS of $2.49, outpacing the Zacks Consensus Estimate by 1.2%. Revenues of $4.13 billion surpassed the consensus mark by 0.7%. The company carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Accuray reported third-quarter fiscal 2020 adjusted EPS of a penny, whereas the Zacks Consensus Estimate was pegged at a loss of 7 cents. Net revenues of $98.8 million outpaced the Zacks Consensus Estimate by 0.3%. The company sports a Zacks Rank #1 at present.

AmerisourceBergen reported first-quarter fiscal 2020 adjusted EPS of $1.76, which beat the consensus estimate of $1.67 by 5.4%. The company, currently carrying a Zacks Rank #2, has an expected long-term earnings growth rate of 7.4%.

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