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Here's Why You Should Retain Syneos Health (SYNH) For Now
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Syneos Health, Inc. is well poised for growth in the coming quarters owing to strength in the Clinical Solutions arm. Increased start-up activities across both the company’s COVID and non-COVID projects contributed to growth in the Clinical Solutions business. The company’s notable partnership deals buoy optimism. The raised guidance for 2021 is indicative that this growth momentum will continue. However, macroeconomic woes and foreign currency fluctuations remain concerns.
Over the past year, the Zacks Rank #3 (Hold) stock has gained 69.6% against the 21.8% decline of the industry and 35.1% rise of the S&P 500.
The renowned provider of biopharmaceutical outsourcing solutions has a market capitalization of $9.29 billion. Its earnings for second-quarter 2021 surpassed the Zacks Consensus Estimate by 3.2%.
Over the past five years, the company’s earnings rose 10.9%, ahead of the industry’s 6.1% rise and the S&P 500’s 2.8% increase. The expected growth rate for the next year is estimated at 16.3%, compared with the industry’s growth expectation of 19.2% and the S&P 500’s estimated 15.5% growth for the following year.
Image Source: Zacks Investment Research
Let’s delve deeper.
Factors At Play
Strong Clinical Solutions Arm: The Clinical Solutions segment registered revenue growth of 31.1% year over year on a reported basis and 27.5% at CER during the second quarter of 2021. The upside resulted from the impact of acquisitions and increased project start-up activities across both the company’s COVID and non-COVID projects, and contributions from its 2020 acquisitions. Clinical Solutions also posted a solid second quarter of net awards (fueled in part by continued strength in the SMID segment) and backlog growth (up 21.5%). Continuous improvement in the pace of both patient enrollment and the start of new clinical trials also raise optimism.
Partnerships to Add Value: We are upbeat about Syneos Health’s collaboration with Aetion in the second quarter to expand its dynamic assembly network of DCT data and technology providers to best serve its customers. In May, the company expanded its partnership with Komodo Health in the field of biopharmaceutical product development. In April, the company also entered into a strategic partnership with Medable to increase clinical trial diversity while improving patient access and experiences to boost biopharmaceutical product development. In March, the company entered into a strategic alliance with Science 37 to facilitate improved decentralized clinical trial delivery.
Upbeat Guidance: Syneos Health’s updated revenue and EPS guidance for 2021 with strong full-year earnings and revenues growth projections buoys optimism. The company expects full-year revenues in the range of $5,180-5,300 million, suggesting growth of 17.3-20%. Adjusted EPS for the year is expected in the band of $4.25-$4.43, calling for growth of 24.6-29.9% year over year.
Downsides
Exposure to Foreign Currency: Syneos Health generated approximately 19% of its revenues for the year ended Dec 31, 2020, denominated in currencies other than the U.S. dollar. 37% of its direct and operating costs were incurred in countries with functional currencies other than the U.S. dollar. Thereby, any change in foreign currency exchange rates could significantly affect the company’s financial condition, results of operations or cash flows.
Tough Competitive Landscape: Syneos Health primarily competes with full-service CROs and services offered by in-house R&D departments of biopharmaceutical companies, universities and teaching hospitals in the Clinical Solutions segment. The company also faces significant competition in the Commercial Solutions segment from notable players like IQVIA Holdings Inc. (IQV - Free Report) .
Economic Uncertainty: Syneos Health has operations in many foreign countries, including countries in the Asia-Pacific region, Europe, Latin America, the Middle East and Africa. Weaker global economic conditions may lead to reduced demand for the company’s products, increased competition, pressure on prices, declining supply and a lengthier sales cycle. The company is also exposed to the risk of political unrest.
Estimate Trend
Syneos Health has been witnessing a positive estimate revision trend for 2021. Over the past 90 days, the Zacks Consensus Estimate for its earnings has moved 0.9% north to $4.35.
The Zacks Consensus Estimate for its third-quarter 2021 revenues is pegged at $1.35 billion, suggesting a 22.4% rise from the year-ago reported number.
Image: Bigstock
Here's Why You Should Retain Syneos Health (SYNH) For Now
Syneos Health, Inc. is well poised for growth in the coming quarters owing to strength in the Clinical Solutions arm. Increased start-up activities across both the company’s COVID and non-COVID projects contributed to growth in the Clinical Solutions business. The company’s notable partnership deals buoy optimism. The raised guidance for 2021 is indicative that this growth momentum will continue. However, macroeconomic woes and foreign currency fluctuations remain concerns.
Over the past year, the Zacks Rank #3 (Hold) stock has gained 69.6% against the 21.8% decline of the industry and 35.1% rise of the S&P 500.
The renowned provider of biopharmaceutical outsourcing solutions has a market capitalization of $9.29 billion. Its earnings for second-quarter 2021 surpassed the Zacks Consensus Estimate by 3.2%.
Over the past five years, the company’s earnings rose 10.9%, ahead of the industry’s 6.1% rise and the S&P 500’s 2.8% increase. The expected growth rate for the next year is estimated at 16.3%, compared with the industry’s growth expectation of 19.2% and the S&P 500’s estimated 15.5% growth for the following year.
Let’s delve deeper.
Factors At Play
Strong Clinical Solutions Arm: The Clinical Solutions segment registered revenue growth of 31.1% year over year on a reported basis and 27.5% at CER during the second quarter of 2021. The upside resulted from the impact of acquisitions and increased project start-up activities across both the company’s COVID and non-COVID projects, and contributions from its 2020 acquisitions. Clinical Solutions also posted a solid second quarter of net awards (fueled in part by continued strength in the SMID segment) and backlog growth (up 21.5%). Continuous improvement in the pace of both patient enrollment and the start of new clinical trials also raise optimism.
Partnerships to Add Value: We are upbeat about Syneos Health’s collaboration with Aetion in the second quarter to expand its dynamic assembly network of DCT data and technology providers to best serve its customers. In May, the company expanded its partnership with Komodo Health in the field of biopharmaceutical product development. In April, the company also entered into a strategic partnership with Medable to increase clinical trial diversity while improving patient access and experiences to boost biopharmaceutical product development. In March, the company entered into a strategic alliance with Science 37 to facilitate improved decentralized clinical trial delivery.
Upbeat Guidance: Syneos Health’s updated revenue and EPS guidance for 2021 with strong full-year earnings and revenues growth projections buoys optimism. The company expects full-year revenues in the range of $5,180-5,300 million, suggesting growth of 17.3-20%. Adjusted EPS for the year is expected in the band of $4.25-$4.43, calling for growth of 24.6-29.9% year over year.
Downsides
Exposure to Foreign Currency: Syneos Health generated approximately 19% of its revenues for the year ended Dec 31, 2020, denominated in currencies other than the U.S. dollar. 37% of its direct and operating costs were incurred in countries with functional currencies other than the U.S. dollar. Thereby, any change in foreign currency exchange rates could significantly affect the company’s financial condition, results of operations or cash flows.
Tough Competitive Landscape: Syneos Health primarily competes with full-service CROs and services offered by in-house R&D departments of biopharmaceutical companies, universities and teaching hospitals in the Clinical Solutions segment. The company also faces significant competition in the Commercial Solutions segment from notable players like IQVIA Holdings Inc. (IQV - Free Report) .
Economic Uncertainty: Syneos Health has operations in many foreign countries, including countries in the Asia-Pacific region, Europe, Latin America, the Middle East and Africa. Weaker global economic conditions may lead to reduced demand for the company’s products, increased competition, pressure on prices, declining supply and a lengthier sales cycle. The company is also exposed to the risk of political unrest.
Estimate Trend
Syneos Health has been witnessing a positive estimate revision trend for 2021. Over the past 90 days, the Zacks Consensus Estimate for its earnings has moved 0.9% north to $4.35.
The Zacks Consensus Estimate for its third-quarter 2021 revenues is pegged at $1.35 billion, suggesting a 22.4% rise from the year-ago reported number.
Key Picks
Two better-ranked stocks from the Medical Info Systems industry include Computer Programs and Systems, Inc. and Omnicell, Inc. (OMCL - Free Report) , each sporting a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Computer Programs and Systems has a long-term earnings growth rate of 14.3%.
Omnicell has a long-term earnings growth rate of 16%.