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Syneos Health (SYNH) Q1 Earnings Top Estimates, Margins Up

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Syneos Health Inc. (SYNH - Free Report) reported first-quarter 2022 adjusted earnings per share (EPS) of $1.01, which exceeded the Zacks Consensus Estimate by 5.2%. The metric increased 27.8% from the year-ago figure.

GAAP EPS was 44 cents, reflecting an increase of 18.9% from the year-ago 37 cents.

Revenues in Detail

Revenues in the quarter totaled $1.34 billion. The top line surged 10.5% year over year on a reported basis (up 11.7% at constant exchange rate or CER). It surpassed the Zacks Consensus Estimate by 0.8%.

The year-over-year uptick resulted from a strong performance by the Clinical Solutions and Commercial Solutions businesses.

Segmental Details

The Clinical Solutions segment recorded revenues of $1.02 billion in the first quarter, up 8.4% year over year on a reported basis and 9.6% at CER. Further, acquisitions contributed 100 basis points (bps) to total growth.

Syneos Health, Inc. Price, Consensus and EPS Surprise

Commercial Solutions’ revenues were $317.9 million in the reported quarter, up 18.1% year over year and 18.9% at CER. The robust growth in this segment was driven by expansion across core commercial businesses, with particular strength in deployment solutions and consulting.

Margin Details

Direct cost (excluding depreciation and amortization) rose 10.5% to $1.04 billion in the quarter. Gross margin expanded 4 bps to 21.8%.

Selling, general and administrative expenses rose 2.1% year over year to $140.2 million.

Adjusted operating margin (excluding depreciation, amortization, and restructuring and other expenses) expanded 91 bps from the year-ago quarter to 11.3%.

Financial Details

Syneos Health exited the first quarter of 2022 with cash and cash equivalents, and restricted cash of $119.2 million compared with $106.5 million at the end of the fourth quarter of 2021. Long-term debt at the end of the first quarter of 2022 was $2.91 billion compared with $2.78 billion at the end of the fourth quarter of 2021.

For the first quarter of 2022, the company repurchased $160 million of common stock and $32.5 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 first quarter of 2022 was $70.9 million compared with $127.1 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 first quarter of 2022 were $23.5 million compared with $11.2 million a year ago.

2022 Guidance

Syneos Health has updated its revenue and EPS guidance for 2022, taking into account the existing backlog, current sales pipeline, trends in cancellations and delays,  trends in reimbursable out-of-pocket expenses and the company’s ‘ForwardBound’ initiative.

The company now expects full-year revenues in the range of $5,600-$5,750 million (unchanged from the previous guidance issued in February 2022). The Zacks Consensus Estimate for the same is currently pegged at $5.67 billion.

Adjusted EPS for the year is projected in the band of $5.05-$5.25 (previous guidance was $4.98-$5.24). The Zacks Consensus Estimate for the same is currently pegged at $5.08.

Our Take

Syneos Health ended the first quarter of 2022 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, a bullish 2022 guidance buoys optimism. Expansion of both margins is an added plus. However, the escalating operating expenses are worrying. An increase in long-term debt is discouraging too.

Zacks Rank and Key Picks

Syneos Health currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader medical space that have announced quarterly results are Qiagen N.V. (QGEN - Free Report) , UnitedHealth Group Incorporated (UNH - Free Report) and Alkermes plc (ALKS - Free Report) .

Qiagen, carrying a Zacks Rank #2 (Buy), reported first-quarter 2022 adjusted EPS of 80 cents, which beat the Zacks Consensus Estimate by 12.7%. Revenues of $628.4 million outpaced the consensus mark by 6.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Qiagen has an estimated long-term growth rate of 11.5%. QGEN’s earnings surpassed estimates in the trailing four quarters, the average surprise being 11.7%.

UnitedHealth, having a Zacks Rank #2, reported first-quarter 2022 adjusted EPS of $5.49, which beat the Zacks Consensus Estimate by 1.7%. Revenues of $80.1 billion outpaced the consensus mark by 14.2%.

UnitedHealth has an estimated long-term growth rate of 14.8%. UNH’s earnings surpassed estimates in the trailing four quarters, the average surprise being 3.7%.

Alkermes reported first-quarter 2022 adjusted EPS of 12 cents, which surpassed the Zacks Consensus Estimate of a penny. First-quarter revenues of $278.6 million outpaced the Zacks Consensus Estimate by 6.2%. It currently sports a Zacks Rank #1.

Alkermes has an estimated long-term growth rate of 25.1%. ALKS’ earnings surpassed estimates in the trailing four quarters, the average surprise being 350.5%.

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