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Syneos Health (SYNH) Q2 Earnings Top Estimates, Cuts '22 View

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Syneos Health Inc. (SYNH - Free Report) reported second-quarter 2022 adjusted earnings per share (EPS) of $1.25, which exceeded the Zacks Consensus Estimate by 4.2%. The metric increased 28.9% from the year-ago figure.

GAAP EPS was 75 cents, reflecting an increase of 87.5% from the year-ago 40 cents.

Revenues in Detail

Revenues in the quarter totaled $1.36 billion. The top line surged 6.1% year over year on a reported basis (up 8.3% at constant exchange rate or CER). It missed the Zacks Consensus Estimate by 1.8%.

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 $1.03 billion in the second quarter, up 3.3% year over year on a reported basis and 5.6% at CER. Further, acquisitions contributed 90 basis points (bps) to total growth.

Syneos Health, Inc. Price, Consensus and EPS Surprise

 

Syneos Health, Inc. Price, Consensus and EPS Surprise

Syneos Health, Inc. price-consensus-eps-surprise-chart | Syneos Health, Inc. Quote

 

Commercial Solutions’ revenues were $335 million in the reported quarter, up 15.7% year over year and 17.5% at CER. The robust growth in this segment was driven by growth across deployment solutions and the Syneos One portfolio.

Margin Details

Direct cost (excluding depreciation and amortization) rose 4.3% to $1.03 billion in the quarter. The gross margin expanded 133 bps to 23.9%.

Selling, general and administrative expenses fell 3.9% year over year to $139 million.

Adjusted operating margin (excluding depreciation, amortization and restructuring and other expenses) expanded 240 bps from the year-ago quarter to 13.7%.

Financial Details

Syneos Health exited the second quarter of 2022 with cash and cash equivalents and restricted cash of $105.9 million compared with $119.2 million at the end of the first quarter of 2022. Long-term debt at the end of the second quarter of 2022 was $2.81 billion compared with $2.91 billion at the end of the first quarter of 2022.

For the second quarter of 2022, the company did not repurchase any common stock. The company still has $350 million available for share repurchase under its current plan.

Cumulative net cash provided by operating activities at the end of the second quarter of 2022 was $170.8 million compared with $215.8 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 2022 were $47.9 million compared with $22.3 million a year ago.

2022 Guidance

Syneos Health has updated its revenue and EPS guidance for 2022, considering 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 $5,440-$5,540 million (down from the previous guidance of $5,600-$5,750). The Zacks Consensus Estimate for the same is currently pegged at $5.69 billion.

Adjusted EPS for the year is projected in the band of $4.97-$5.11 (previous guidance was $5.05-$5.25). The Zacks Consensus Estimate for the same is currently pegged at $5.11.

Our Take

Syneos Health ended the second quarter of 2022 with better-than-expected earnings. The year-over-year improvement in earnings and revenues looks impressive. Robust performance across both operating segments is encouraging as well. The continued strength in the company’s SMID customer segment instills optimism. Expansion of margins bodes well. A strong backlog growth is an added upside.

However, the company’s revenues for the second quarter missed the Zacks Consensus Estimate. Escalating operating expenses is concerning. The company slashed its revenue and EPS view for 2022, raising apprehension. Lower reimbursable expenses and foreign exchange headwinds continue to challenge business performance.

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 quarterly results are Quest Diagnostics Incorporated (DGX - Free Report) , Molina Healthcare, Inc. (MOH - Free Report) and Merck & Co. (MRK - Free Report) .

Quest Diagnostics, carrying a Zacks Rank #2 (Buy), reported second-quarter 2022 adjusted EPS of $2.36, which beat the Zacks Consensus Estimate by 9.8%. Revenues of $2.45 billion outpaced the consensus mark by 7.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Quest Diagnostics has an earnings yield of 7.0% compared with the industry’s 3.2%. DGX’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, the average being 12.1%.

Molina Healthcare, having a Zacks Rank #2, reported second-quarter 2022 adjusted EPS of $ 4.55, which beat the Zacks Consensus Estimate by 4.8%. Revenues of $8.1 billion outpaced the consensus mark by 6.2%.

Molina Healthcare has a long-term estimated growth rate of 16.4%. MOH’s earnings surpassed estimates in the trailing four quarters, the average being 3.2%.

Merck reported second-quarter 2022 adjusted earnings of $1.87 per share, beating the Zacks Consensus Estimate of $1.67. Revenues of $14.6 billion surpassed the Zacks Consensus Estimate by 5.4%. It currently has a Zacks Rank #2.

Merck has a long-term estimated growth rate of 10.1%. MRK’s earnings surpassed estimates in the trailing four quarters, the average surprise being 16.8%.