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Syneos Health (SYNH) Q4 Earnings Top Estimates, Margins Down
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Syneos Health Inc. reported fourth-quarter 2021 adjusted earnings per share (EPS) of $1.48, which exceeded the Zacks Consensus Estimate by 3.5%. The metric increased 33.3% from the year-ago figure.
GAAP EPS was 72 cents, marking a significant decline from the year-ago figure of 87 cents.
Full-year adjusted EPS was $4.46, reflecting a 30.8% increase from the year-ago period. Again, the metric surpassed the Zacks Consensus Estimate by 1.1%.
Revenues in Detail
Revenues in the quarter totaled $1.37 billion. The top line surged 20.5% year over year on a reported basis (up 20.8% at constant exchange rate or CER). However, it missed the Zacks Consensus Estimate by 2.2%.
The year-over-year uptick resulted from a strong performance by the Clinical Solutions and Commercial Solutions businesses.
Total revenues for 2021 were $5.21 billion, up 18.1% from the year-ago period. This figure lagged the Zacks Consensus Estimate by 0.6%.
Segmental Details
The Clinical Solutions segment recorded revenues of $1.04 billion in the fourth quarter, up 20.7% year over year on a reported basis and 21% at CER. The upside resulted from growth in the company’s full-service portfolio, including the ramp-up in larger pharma relationships and strength in the company’s oncology business. Further, acquisitions contributed 1000 basis points (bps) to total growth, while increasing reimbursable expenses provided a 70-bp tailwind.
Syneos Health, Inc. Price, Consensus and EPS Surprise
Commercial Solutions’ revenues were $330.9 million in the reported quarter, up 19.8% year over year and 20.2% at CER. The robust growth in this segment was driven by expansion across core commercial businesses, with particular strength in deployment solutions and consulting. This growth consists of a 260-bp tailwind from reimbursable expenses. However, the divestiture of Medication Adherence in 2020 resulted in an approximate 300-bp headwind to Commercial Solutions’ reported revenue growth.
Margin Details
Direct cost (excluding depreciation and amortization) rose 20.8% to $1.02 billion in the quarter. Gross margin contracted 23 bps to 25.4%.
Selling, general and administrative expenses were up 23.6% year over year to $149.3 million.
Adjusted operating margin (excluding depreciation, amortization, and restructuring and other expenses) contracted 50 bps from the year-ago quarter to 14.5%.
Financial Details
Syneos Health exited 2021 with cash and cash equivalents, and restricted cash of $106.5 million, compared with $272.2 million at the end of 2020. Long-term debt at the end of 2021 was $2.78 billion compared with $2.90 billion at the end of 2020.
The company did not repurchase common stock in the quarter. For full-year 2021, the company repurchased $117.5 million of common stock 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 2021 was $450.3 million compared with $425.5 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 2021 were $56.8 million compared with $50.01 million a year ago. Accordingly, cumulative free cash inflow at the end of the fourth quarter of 2021 was $393.4 million versus the year-ago free cash inflow of $375.5 million.
2022 Guidance
Syneos Health has provided its revenue and EPS guidance for 2022, 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 $5,600-$5,750 million. The Zacks Consensus Estimate for the same is currently pegged at $5.70 billion.
Adjusted EPS for the year is projected in the band of $4.98-$5.24. The Zacks Consensus Estimate for the same is currently pegged at $5.15.
Our Take
Syneos Health ended the fourth quarter of 2021 with better-than-expected earnings. The year-over-year improvement in earnings and revenues looks impressive. Robust performance by the Clinical Solutions and Commercial Solutions segments is encouraging as well. The broad-based growth in Deployment Solutions and consulting led to growth in the Commercial Solutions arm. Meanwhile, continued strength in the company’s SMID customer segment and oncology business buoys optimism.
However, the company’s revenues for the fourth quarter missed the Zacks Consensus Estimate. The escalating operating expenses led to a contraction in adjusted operating margin. The deterioration in short-term cash level is an added disadvantage.
Zacks Rank and Key Picks
Syneos Health currently carries a Zacks Rank #3 (Hold).
Envista reported second-quarter 2021 adjusted EPS of 46 cents, which beat the Zacks Consensus Estimate by 9.5%. Revenues of $651.8 million outpaced the consensus mark by 2.9%.
Envista has a long-term earnings growth rate of 13.5%. NVST has gained 27.9% against the industry’s 16.6% drop over the past year.
McKesson reported third-quarter fiscal 2022 adjusted EPS of $6.15, which beat the Zacks Consensus Estimate of $5.38 per share by 14.3%. Revenues of $68.61 billion surpassed the Zacks Consensus Estimate by 3.2%.
McKesson has a long-term earnings growth rate of 11.8%. MCK has gained 53.9% versus the industry’s 8.2% growth in the past year.
Molina Healthcare reported fourth-quarter 2021 adjusted EPS of $2.88, which surpassed the Zacks Consensus Estimate by 2.1%. Revenues of $7.41 billion outpaced the Zacks Consensus Estimate by 3.9%.
Molina Healthcare has a long-term earnings growth rate of 18.8%. MOH has gained 44.8% compared with the industry’s 44% increase over the past year.
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Syneos Health (SYNH) Q4 Earnings Top Estimates, Margins Down
Syneos Health Inc. reported fourth-quarter 2021 adjusted earnings per share (EPS) of $1.48, which exceeded the Zacks Consensus Estimate by 3.5%. The metric increased 33.3% from the year-ago figure.
GAAP EPS was 72 cents, marking a significant decline from the year-ago figure of 87 cents.
Full-year adjusted EPS was $4.46, reflecting a 30.8% increase from the year-ago period. Again, the metric surpassed the Zacks Consensus Estimate by 1.1%.
Revenues in Detail
Revenues in the quarter totaled $1.37 billion. The top line surged 20.5% year over year on a reported basis (up 20.8% at constant exchange rate or CER). However, it missed the Zacks Consensus Estimate by 2.2%.
The year-over-year uptick resulted from a strong performance by the Clinical Solutions and Commercial Solutions businesses.
Total revenues for 2021 were $5.21 billion, up 18.1% from the year-ago period. This figure lagged the Zacks Consensus Estimate by 0.6%.
Segmental Details
The Clinical Solutions segment recorded revenues of $1.04 billion in the fourth quarter, up 20.7% year over year on a reported basis and 21% at CER. The upside resulted from growth in the company’s full-service portfolio, including the ramp-up in larger pharma relationships and strength in the company’s oncology business. Further, acquisitions contributed 1000 basis points (bps) to total growth, while increasing reimbursable expenses provided a 70-bp tailwind.
Syneos Health, Inc. Price, Consensus and EPS Surprise
Syneos Health, Inc. price-consensus-eps-surprise-chart | Syneos Health, Inc. Quote
Commercial Solutions’ revenues were $330.9 million in the reported quarter, up 19.8% year over year and 20.2% at CER. The robust growth in this segment was driven by expansion across core commercial businesses, with particular strength in deployment solutions and consulting. This growth consists of a 260-bp tailwind from reimbursable expenses. However, the divestiture of Medication Adherence in 2020 resulted in an approximate 300-bp headwind to Commercial Solutions’ reported revenue growth.
Margin Details
Direct cost (excluding depreciation and amortization) rose 20.8% to $1.02 billion in the quarter. Gross margin contracted 23 bps to 25.4%.
Selling, general and administrative expenses were up 23.6% year over year to $149.3 million.
Adjusted operating margin (excluding depreciation, amortization, and restructuring and other expenses) contracted 50 bps from the year-ago quarter to 14.5%.
Financial Details
Syneos Health exited 2021 with cash and cash equivalents, and restricted cash of $106.5 million, compared with $272.2 million at the end of 2020. Long-term debt at the end of 2021 was $2.78 billion compared with $2.90 billion at the end of 2020.
The company did not repurchase common stock in the quarter. For full-year 2021, the company repurchased $117.5 million of common stock 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 2021 was $450.3 million compared with $425.5 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 2021 were $56.8 million compared with $50.01 million a year ago. Accordingly, cumulative free cash inflow at the end of the fourth quarter of 2021 was $393.4 million versus the year-ago free cash inflow of $375.5 million.
2022 Guidance
Syneos Health has provided its revenue and EPS guidance for 2022, 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 $5,600-$5,750 million. The Zacks Consensus Estimate for the same is currently pegged at $5.70 billion.
Adjusted EPS for the year is projected in the band of $4.98-$5.24. The Zacks Consensus Estimate for the same is currently pegged at $5.15.
Our Take
Syneos Health ended the fourth quarter of 2021 with better-than-expected earnings. The year-over-year improvement in earnings and revenues looks impressive. Robust performance by the Clinical Solutions and Commercial Solutions segments is encouraging as well. The broad-based growth in Deployment Solutions and consulting led to growth in the Commercial Solutions arm. Meanwhile, continued strength in the company’s SMID customer segment and oncology business buoys optimism.
However, the company’s revenues for the fourth quarter missed the Zacks Consensus Estimate. The escalating operating expenses led to a contraction in adjusted operating margin. The deterioration in short-term cash level is an added disadvantage.
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 Envista Holdings Corporation (NVST - Free Report) , McKesson Corporation (MCK - Free Report) and Molina Healthcare, Inc. (MOH - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Envista reported second-quarter 2021 adjusted EPS of 46 cents, which beat the Zacks Consensus Estimate by 9.5%. Revenues of $651.8 million outpaced the consensus mark by 2.9%.
Envista has a long-term earnings growth rate of 13.5%. NVST has gained 27.9% against the industry’s 16.6% drop over the past year.
McKesson reported third-quarter fiscal 2022 adjusted EPS of $6.15, which beat the Zacks Consensus Estimate of $5.38 per share by 14.3%. Revenues of $68.61 billion surpassed the Zacks Consensus Estimate by 3.2%.
McKesson has a long-term earnings growth rate of 11.8%. MCK has gained 53.9% versus the industry’s 8.2% growth in the past year.
Molina Healthcare reported fourth-quarter 2021 adjusted EPS of $2.88, which surpassed the Zacks Consensus Estimate by 2.1%. Revenues of $7.41 billion outpaced the Zacks Consensus Estimate by 3.9%.
Molina Healthcare has a long-term earnings growth rate of 18.8%. MOH has gained 44.8% compared with the industry’s 44% increase over the past year.