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Syneos Health (SYNH) Q2 Earnings Top Estimates, 2021 View Up
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Syneos Health Inc. reported second-quarter 2021 adjusted earnings per share (EPS) of 97 cents, which exceeded the Zacks Consensus Estimate by 3.2%. The metric increased 67.2% from the year-ago figure.
GAAP EPS was 40 cents, marking a significant improvement from the year-ago figure of 4 cents.
Revenues in Detail
Revenues in the quarter totaled $1.28 billion. The top line surged 26.6% year over year on a reported basis (up 23.6% at constant exchange rate or CER). Moreover, it surpassed the Zacks Consensus Estimate by 0.8%.
The year-over-year uptick resulted from strong performance by the Clinical Solutions and Commercial Solutions businesses.
Segmental Details
The Clinical Solutions segment recorded revenues of $991.1 million in the second quarter, up 31.1% year over year on a reported basis and 27.5% at CER. The upside resulted from the impact of acquisitions and increased project start-up activities across both the company’s COVID and non-COVID projects. This was partially mitigated by contingent staffing divestiture in 2020.
Syneos Health, Inc. Price, Consensus and EPS Surprise
Commercial Solutions revenues were $291.5 million in the reported quarter, up 13.2% year over year and 12.2% at CER. The robust growth in this segment was driven by broad double-digit expansion across core commercial businesses, with particular strength in consulting and a 75-basis point (bps) tailwind from reimbursable expenses. The divestiture of Medication Adherence in 2020 resulted in an approximate 250-bp headwind to Commercial Solutions’ reported revenue growth.
Margin Details
Direct cost (excluding depreciation and amortization) rose 23.2% to $992.6 million in the quarter. Gross margin expanded 214 bps to 22.6%.
Selling, general and administrative expenses were up 33.5% year over year to $144.7 million.
Adjusted operating margin (excluding depreciation, amortization, and restructuring and other expenses) expanded 155 bps from the year-ago quarter to 11.3%.
Financial Details
Syneos Health exited the second quarter of 2021 with cash and cash equivalents, and restricted cash of $261.1 million compared with $264.7 million at the end of first-quarter 2021. Long-term debt at the end of the second quarter of 2021 was unchanged at $2.86 billion when compared with the end of first-quarter 2021.
The company repurchased $73 million of common stock in the quarter and $182.5 million is still available for share repurchase under the company’s current plan.
Cumulative net cash provided by operating activities at the end of the second quarter of 2021 was $215.8 million compared with net cash inflow of $155.2 million in the year-ago period.
Cumulative capital expenses (in the form of purchases of property and equipment) incurred by the company at the end of the second quarter of 2021 was $22.3 million compared with $30.1 million a year ago. Accordingly, cumulative free cash inflow at the end of the second quarter of 2021 was $193.5 million versus the year-ago free cash inflow of $125.1 million.
2021 Guidance Raised
Syneos Health has updated its revenue and EPS guidance for 2021, taking into account the pandemic-led impact, existing backlog, current sales pipeline, trends in cancellations and delays, and the company’s ‘ForwardBound’ initiative.
The company expects full-year revenues in the range of $5.18-$5.30 billion, indicating a slight improvement from the guidance of $5.123-$5.325 billion announced in April, which had suggested growth of 17.3-20%. The Zacks Consensus Estimate for the same is currently pegged at $5.23 billion.
Adjusted EPS for the year is expected in the band of $4.25-$4.43, suggesting growth of 24.6-29.9% year over year (the earlier range was $4.17-$4.42). The Zacks Consensus Estimate for the same is currently pegged at $4.32.
Our Take
Syneos Health exited the second quarter of 2021 with better-than-expected results. The year-over-year improvement in earnings and revenues looks impressive. Strong performance across the Clinical Solutions and Commercial Solutions segments is encouraging as well. The company’s strength in consulting services and increased project start up activities across both COVID and non-COVID projects buoy optimism. Expansion of both margins also bode well. The company has raised its guidance for 2021, which is indicative that this growth momentum will continue.
However, rise in operating expenses is concerning.
Zacks Rank and Key Picks
Syneos Health currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced their quarterly results are Encompass Health Corporation (EHC - Free Report) , West Pharmaceutical Services, Inc. (WST - Free Report) and Bruker Corporation (BRKR - Free Report) .
Encompass Health, carrying a Zacks Rank #1 (Strong Buy), reported second-quarter 2021 adjusted EPS of $1.17, which beat the Zacks Consensus Estimate by 15.8%. Revenues of $1.3 billion outpaced the consensus mark by 1.5%.You can see the complete list of today’s Zacks #1 Rank stocks here.
West Pharmaceutical, carrying a Zacks Rank #2 (Buy), reported second-quarter 2021 adjusted EPS of $2.46, which surpassed the Zacks Consensus Estimate by 41.4%. Revenues of $723.6 million outpaced the Zacks Consensus Estimate by 8.7%.
Bruker, sporting a Zacks Rank #2, reported second-quarter 2021 adjusted EPS of 44 cents, surpassing the Zacks Consensus Estimate by 10%. Revenues of $570.8 million beat the Zacks Consensus Estimate by 6.1%.
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Syneos Health (SYNH) Q2 Earnings Top Estimates, 2021 View Up
Syneos Health Inc. reported second-quarter 2021 adjusted earnings per share (EPS) of 97 cents, which exceeded the Zacks Consensus Estimate by 3.2%. The metric increased 67.2% from the year-ago figure.
GAAP EPS was 40 cents, marking a significant improvement from the year-ago figure of 4 cents.
Revenues in Detail
Revenues in the quarter totaled $1.28 billion. The top line surged 26.6% year over year on a reported basis (up 23.6% at constant exchange rate or CER). Moreover, it surpassed the Zacks Consensus Estimate by 0.8%.
The year-over-year uptick resulted from strong performance by the Clinical Solutions and Commercial Solutions businesses.
Segmental Details
The Clinical Solutions segment recorded revenues of $991.1 million in the second quarter, up 31.1% year over year on a reported basis and 27.5% at CER. The upside resulted from the impact of acquisitions and increased project start-up activities across both the company’s COVID and non-COVID projects. This was partially mitigated by contingent staffing divestiture in 2020.
Syneos Health, Inc. Price, Consensus and EPS Surprise
Syneos Health, Inc. price-consensus-eps-surprise-chart | Syneos Health, Inc. Quote
Commercial Solutions revenues were $291.5 million in the reported quarter, up 13.2% year over year and 12.2% at CER. The robust growth in this segment was driven by broad double-digit expansion across core commercial businesses, with particular strength in consulting and a 75-basis point (bps) tailwind from reimbursable expenses. The divestiture of Medication Adherence in 2020 resulted in an approximate 250-bp headwind to Commercial Solutions’ reported revenue growth.
Margin Details
Direct cost (excluding depreciation and amortization) rose 23.2% to $992.6 million in the quarter. Gross margin expanded 214 bps to 22.6%.
Selling, general and administrative expenses were up 33.5% year over year to $144.7 million.
Adjusted operating margin (excluding depreciation, amortization, and restructuring and other expenses) expanded 155 bps from the year-ago quarter to 11.3%.
Financial Details
Syneos Health exited the second quarter of 2021 with cash and cash equivalents, and restricted cash of $261.1 million compared with $264.7 million at the end of first-quarter 2021. Long-term debt at the end of the second quarter of 2021 was unchanged at $2.86 billion when compared with the end of first-quarter 2021.
The company repurchased $73 million of common stock in the quarter and $182.5 million is still available for share repurchase under the company’s current plan.
Cumulative net cash provided by operating activities at the end of the second quarter of 2021 was $215.8 million compared with net cash inflow of $155.2 million in the year-ago period.
Cumulative capital expenses (in the form of purchases of property and equipment) incurred by the company at the end of the second quarter of 2021 was $22.3 million compared with $30.1 million a year ago. Accordingly, cumulative free cash inflow at the end of the second quarter of 2021 was $193.5 million versus the year-ago free cash inflow of $125.1 million.
2021 Guidance Raised
Syneos Health has updated its revenue and EPS guidance for 2021, taking into account the pandemic-led impact, existing backlog, current sales pipeline, trends in cancellations and delays, and the company’s ‘ForwardBound’ initiative.
The company expects full-year revenues in the range of $5.18-$5.30 billion, indicating a slight improvement from the guidance of $5.123-$5.325 billion announced in April, which had suggested growth of 17.3-20%. The Zacks Consensus Estimate for the same is currently pegged at $5.23 billion.
Adjusted EPS for the year is expected in the band of $4.25-$4.43, suggesting growth of 24.6-29.9% year over year (the earlier range was $4.17-$4.42). The Zacks Consensus Estimate for the same is currently pegged at $4.32.
Our Take
Syneos Health exited the second quarter of 2021 with better-than-expected results. The year-over-year improvement in earnings and revenues looks impressive. Strong performance across the Clinical Solutions and Commercial Solutions segments is encouraging as well. The company’s strength in consulting services and increased project start up activities across both COVID and non-COVID projects buoy optimism. Expansion of both margins also bode well. The company has raised its guidance for 2021, which is indicative that this growth momentum will continue.
However, rise in operating expenses is concerning.
Zacks Rank and Key Picks
Syneos Health currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced their quarterly results are Encompass Health Corporation (EHC - Free Report) , West Pharmaceutical Services, Inc. (WST - Free Report) and Bruker Corporation (BRKR - Free Report) .
Encompass Health, carrying a Zacks Rank #1 (Strong Buy), reported second-quarter 2021 adjusted EPS of $1.17, which beat the Zacks Consensus Estimate by 15.8%. Revenues of $1.3 billion outpaced the consensus mark by 1.5%.You can see the complete list of today’s Zacks #1 Rank stocks here.
West Pharmaceutical, carrying a Zacks Rank #2 (Buy), reported second-quarter 2021 adjusted EPS of $2.46, which surpassed the Zacks Consensus Estimate by 41.4%. Revenues of $723.6 million outpaced the Zacks Consensus Estimate by 8.7%.
Bruker, sporting a Zacks Rank #2, reported second-quarter 2021 adjusted EPS of 44 cents, surpassing the Zacks Consensus Estimate by 10%. Revenues of $570.8 million beat the Zacks Consensus Estimate by 6.1%.