Syneos Health Inc. ( SYNH Quick Quote SYNH - Free Report) reported fourth-quarter 2020 adjusted earnings per share (“EPS”) of $1.11, which were in line with the Zacks Consensus Estimate. The metric increased 7.8% from the year-ago figure.
The year-over-year increase in adjusted earnings was the result of the company’s synergies and cost management strategies, including ForwardBound, and lower reimbursable out-of-pocket expenses. However, this was partially offset by the pandemic-induced impacts.
GAAP EPS was 87 cents, marking a 1.2% improvement from the year-ago figure.
Full-year adjusted EPS was $3.41, reflecting a 5.6% increase from the year-ago period. Again, the metric was in line with the Zacks Consensus Estimate.
Full-year GAAP EPS was $1.83, reflecting a surge of 46.4% from the year-ago period.
Revenues in Detail
Revenues in the quarter totaled $1.14 billion. The top line declined 6% year over year on a reported basis (down 6.1% on an adjusted basis and 7% on a constant currency adjusted basis). It, however, surpassed the Zacks Consensus Estimate by 0.5%. Adjusted revenues include revenues eliminated as a result of purchase accounting.
The year-over-year decline was due to dull performances by both Clinical Solutions and Commercial Solutions. Revenues were less than expected in the quarter due to the decrease in reimbursable out-of-pocket expenses.
The Clinical Solutions segment recorded revenues of $855.6 million in the fourth quarter; down 4.9% year over year on a reported basis (down 5.9% at CER adjusted). The downside resulted from the impacts of COVID-19, including the related decline in reimbursable out-of-pocket expenses, and the second-quarter divestiture of the company’s contingent staffing business. This was partially mitigated by the positive impact of fluctuations in foreign currency exchange rates and the Synteract buyout.
Commercial Solutions revenues were $284.5 million in the reported quarter, down 9.3% year over year (down 9.9% at CER). The decline was caused by the impact of COVID-19, including a disproportionate decline in reimbursable out-of-pocket expenses as well as delays in new project starts. The negative impacts of the divestiture of the company’s medication adherence business in November 2020 also dented segmental revenues.
Direct cost (excluding depreciation and amortization) declined 8.6% to $848 million in the quarter. Gross margin expanded 211 basis points (bps) to 25.6%.
Selling, general and administrative expenses were down 3.5% year over year to $108.4 million.
Adjusted operating margin (excluding depreciation, amortization, transaction and integration-related, and restructuring and other expenses) expanded 187 bps from the year-ago quarter to 16.1%.
Syneos Health exited 2020 with cash and cash equivalents, and restricted cash of $272.2 million, compared with $163.7 million at the end of 2019. Total debt at the end of 2020 was $2.90 billion compared with $2.61 billion at the end of 2019.
Cumulative net cash provided by operating activities at the end of 2020 was $425.5 million compared with $318.5 million in the year-ago period.
Syneos Health has upped its revenue outlook and initiated adjusted EPS guidance for the year 2021.
The company expects its full-year revenues to be in the range of $5,125 million-$5,325 million (up from the earlier-issued guidance range of $4,900 million-$5,100 million, which excluded the announced acquisition of Synteract). The Zacks Consensus Estimate for the same is currently pegged at $5.22 billion.
The adjusted EPS for the year is expected in the band of $4.09-$4.38. The Zacks Consensus Estimate for the same is currently pegged at $4.21.
Syneos Health exited the fourth quarter of 2020 with better-than-expected revenues and in-line earnings. Sequential revenue growth in both the operating segments was observed in the reported quarter. Ongoing business recovery looks encouraging. Expansion of both margins also bodes well. The company has increased its revenue guidance for 2021, which instills investors’ confidence.
However, the decline in revenues on a year-over-year basis is concerning. The company registered significant sales decline in both of its business segments due to slower recovery in reimbursable out-of-pocket expenses. This was due to an increase in virtual operations and a slower recovery in patient enrollment.
Zacks Rank & Key Picks
Currently, Syneos Health carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space are
Abbott Laboratories ( ABT Quick Quote ABT - Free Report) , Hologic, Inc. ( HOLX Quick Quote HOLX - Free Report) and IDEXX Laboratories, Inc. ( IDXX Quick Quote IDXX - Free Report) .
Abbott reported fourth-quarter 2020 adjusted EPS of $1.45, which surpassed the Zacks Consensus Estimate by 6.6%. Fourth-quarter worldwide sales of $10.7 billion outpaced the consensus mark by 7.9%. The company currently carries a Zacks Rank #2 (Buy). You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Hologic reported first-quarter fiscal 2021 adjusted EPS of $2.86, beating the Zacks Consensus Estimate by 33.6%. The company currently carries a Zacks Rank #2.
IDEXX reported fourth-quarter 2020 adjusted EPS of $2.01 which surpassed the Zacks Consensus Estimate by 40.6%. Revenues of $720.9 million beat the consensus mark by 5.8%. The company currently carries a Zacks Rank #2.
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