Back to top

Image: Bigstock

Here's Why You Should Invest in Syneos Health (SYNH) Now

Read MoreHide Full Article

Syneos Health, Inc. has been gaining on solid sequential recovery in revenues in its Clinical Solutions business. Its slew of partnerships has also been impressive to date. Further, its better-than-expected earnings in the third quarter of 2020 buoy optimism. However, downsides may result from a stiff competitive landscape and a strict regulatory environment.

Over the past year, this currently Zacks Rank #2 (Buy) stock has rallied 21.4% compared with 27.9% growth of the industry and the S&P 500’s 17.3% rise.

The renowned global biopharmaceutical solutions player has a market capitalization of $6.93 billion. It projects 22.9% growth for the next year and expects to witness ongoing business recovery. The company surpassed estimates in all the trailing four quarters, the average surprise being 12.01%.

Let’s delve deeper.

Strong Q3 Results: We are upbeat about Syneos Health’s third-quarter 2020 results. Its bottom-line growth in the quarter despite business disruptions is impressive. There was solid sequential revenue growth in the reported quarter with Clinical Solutions revenues showing the strongest sequential recovery during the period. Margin improvement was also significant year over year. The company increased its adjusted EPS guidance for 2020, raising optimism on the stock.

It won 60 COVID-19 related projects through the end of the third quarter and still has a substantial pipeline of additional COVID-related opportunities.

Partnerships to Add Value: We are optimistic about Syneos Health’s progress with its partnership deals. The company, in October, announced an agreement to acquire Synteract, which is a full-service Contract Research Organization (CRO) focused on the rapidly emerging biopharma segment.

The company, in August, announced an innovative commercial relationship with Idorsia Ltd for the U.S. commercialization of Idorsia’s daridorexant. Notably, daridorexant is a new dual orexin receptor antagonist, which is currently being investigated for the treatment of insomnia. Another notable agreement signed by Syneos Health was the new three-year agreement with Pfizer Inc. (in July) to deliver global product development solutions to support the latter's portfolio.

Rebound in Clinical Services Arm: We are upbeat about Syneos Health’s year-over-year backlog growth for the segment during the third quarter. Further, the segment registered the strongest sequential recovery during the quarter. Also, Clinical Solutions posted a solid third quarter of net business awards, registering solid year over year growth.

Further, the company has been witnessing continued improvement in the pace of both patient enrollment and the start of new clinical trials. Also, Clinical FSP business remained resilient and recorded year-over-year revenue growth.

However, Syneos Health’s operation in a highly competitive industry, which include large and smaller specialty CROs, large global communications holding companies, smaller specialized communications agencies, contract sales organizations and a wide range of consulting companies, may induce headwinds.

Further, the biopharmaceutical industry is controlled by very stringent governmental regulations in both domestic and global markets. Within the Clinical Solutions business, the FDA regulates the clinical trials of drug products in human enrollments as well as the form and content of regulatory applications. Globally, the clinical trials are governed by the laws and regulations of the country where these are conducted. If the company fails to perform its services in accordance with the regulatory requirements, it could be subject to significant costs or liability along with jeopardizing its reputation.

Estimate Trend

Syneos Health has been witnessing a positive estimate revision trend for 2020. Over the past 90 days, the Zacks Consensus Estimate for its current-year earnings has moved 5.6% north to $3.41.

The Zacks Consensus Estimate for fourth-quarter 2020 revenues is pegged at $1.15 billion, suggesting a 5.4% fall from the year-ago reported number.

Other Key Picks

A few other top-ranked stocks from the broader medical space are Hologic, Inc. (HOLX - Free Report) , ResMed Inc. (RMD - Free Report) and Thermo Fisher Scientific Inc. (TMO - Free Report) .

Hologic’s long-term earnings growth rate is estimated at 17.4%. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

ResMed’s long-term earnings growth rate is estimated at 14.5%. The company presently carries a Zacks Rank #2.

Thermo Fisher’s long-term earnings growth rate is estimated at 18%. It currently carries a Zacks Rank #2.

The Hottest Tech Mega-Trend of All

Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Thermo Fisher Scientific Inc. (TMO) - free report >>

ResMed Inc. (RMD) - free report >>

Hologic, Inc. (HOLX) - free report >>

Published in