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Syneos Health (SYNH) Q4 Earnings Beat Estimates, Margins Down
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Syneos Health Inc. reported fourth-quarter 2022 adjusted earnings per share (EPS) of $1.23, which exceeded the Zacks Consensus Estimate by 4.2%. The metric, however, declined 16.9% from the year-ago figure.
GAAP EPS was 54 cents, reflecting a 25% plunge year over year.
Full-year adjusted EPS was $4.72, a 5.8% improvement from the end of 2021. The metric beat the Zacks Consensus Estimate by 1.1%.
Revenues in Detail
Revenues in the quarter totaled $1.36 billion. The top line was down 1% year over year on a reported basis (up 1.7% at the constant exchange rate or CER). It exceeded the Zacks Consensus Estimate by 5.5%.
Full-year revenues were $5.39 billion, reflecting a 3.5% rise from the comparable 2021 period (up 5.8% at CER). The metric topped the Zacks Consensus Estimate by 1.3%.
Syneos Health, Inc. Price, Consensus and EPS Surprise
The Clinical Solutions segment recorded revenues of $1.02 billion in the fourth quarter, down 2.1% year over year on a reported basis and up 0.7% at CER. In the quarter, lower net awards and the impact of foreign exchange were partially offset by higher reimbursable expenses.
Commercial Solutions revenues were $336.6 million in the reported quarter, up 2.5% year over year and 4.8% at CER. Higher reimbursable expenses and growth in Deployment Solutions contributed to the growth.
Margin Details
Direct cost (excluding depreciation and amortization) rose 1.7% to $1.04 billion in the quarter. The gross margin contracted 199 basis points (bps) to 23.4%.
Selling, general and administrative expenses fell 7.7% year over year to $137.7 million.
Adjusted operating margin (excluding depreciation, amortization and restructuring and other expenses) contracted 124 bps from the year-ago quarter to 13.3%.
Financial Details
Syneos Health exited 2022 with cash and cash equivalents and restricted cash of $112 million compared with $106.5 million at the end of 2021. Long-term debt at the end of 2022 was $2.61 billion compared with $2.78 billion at the end of 2021.
In the fourth quarter of 2022, the company did not repurchase any common stock. During 2022, the company repurchased $150.0 million of 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 fourth quarter of 2022 was $426.9 million compared with $450.3 million in the year-ago period.
2023 Guidance
Syneos Health provided its full-year 2023 guidance.
The company expects full-year revenues in the range of $4,975-$5,175 million. The Zacks Consensus Estimate for the same is currently pegged at $5.03 billion.
Adjusted EPS for the year is projected in the band of $3.26-$3.53. The Zacks Consensus Estimate for the same is currently pegged at $3.48.
Our Take
Syneos Health ended the fourth quarter of 2022, with better-than-expected earnings and revenues. In Clinical Solutions, revenues declined due to lower net awards and the impact of foreign exchange, partially offset by higher reimbursable expenses. Excluding reimbursable expenses and at CER, Clinical Solutions revenue decline was primarily due to lower net awards and backlog conversion delays, largely offset by growth in large pharma business. The contraction of margins is concerning.
However, Commercial Solutions revenue growth was strong, primarily driven by deployment solutions, including the contribution from its Syneos One portfolio.
Zacks Rank and Key Picks
Syneos Health currently carries a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Cardinal Health, Inc. (CAH - Free Report) , McKesson Corporation (MCK - Free Report) and Hologic, Inc. (HOLX - Free Report) .
Cardinal Health, currently carrying a Zacks Rank #2 (Buy), reported second-quarter fiscal 2023 adjusted EPS of $1.32, beating the Zacks Consensus Estimate by 16.8%. Revenues of $51.47 billion outpaced the consensus mark by 2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cardinal Health has a long-term estimated growth rate of 11.6%. CAH’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 6.4%.
McKesson, with a Zacks Rank #2, reported third-quarter fiscal 2023 adjusted EPS of $6.90, which beat the Zacks Consensus Estimate by 8.8%. Revenues of $70.49 billion outpaced the consensus mark by 0.02%.
McKesson has a long-term estimated growth rate of 10.4%. MCK’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 3.4%.
Hologic reported first-quarter fiscal 2023 adjusted earnings of $1.07 per share, beating the Zacks Consensus Estimate by 18.9%. Revenues of $1.07 billion surpassed the Zacks Consensus Estimate by 9.5%. The company currently sports a Zacks Rank #1.
Hologic has a long-term estimated growth rate of 15.2%. HOLX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 30.6%.
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Syneos Health (SYNH) Q4 Earnings Beat Estimates, Margins Down
Syneos Health Inc. reported fourth-quarter 2022 adjusted earnings per share (EPS) of $1.23, which exceeded the Zacks Consensus Estimate by 4.2%. The metric, however, declined 16.9% from the year-ago figure.
GAAP EPS was 54 cents, reflecting a 25% plunge year over year.
Full-year adjusted EPS was $4.72, a 5.8% improvement from the end of 2021. The metric beat the Zacks Consensus Estimate by 1.1%.
Revenues in Detail
Revenues in the quarter totaled $1.36 billion. The top line was down 1% year over year on a reported basis (up 1.7% at the constant exchange rate or CER). It exceeded the Zacks Consensus Estimate by 5.5%.
Full-year revenues were $5.39 billion, reflecting a 3.5% rise from the comparable 2021 period (up 5.8% at CER). The metric topped the Zacks Consensus Estimate by 1.3%.
Syneos Health, Inc. Price, Consensus and EPS Surprise
Syneos Health, Inc. price-consensus-eps-surprise-chart | Syneos Health, Inc. Quote
Segmental Details
The Clinical Solutions segment recorded revenues of $1.02 billion in the fourth quarter, down 2.1% year over year on a reported basis and up 0.7% at CER. In the quarter, lower net awards and the impact of foreign exchange were partially offset by higher reimbursable expenses.
Commercial Solutions revenues were $336.6 million in the reported quarter, up 2.5% year over year and 4.8% at CER. Higher reimbursable expenses and growth in Deployment Solutions contributed to the growth.
Margin Details
Direct cost (excluding depreciation and amortization) rose 1.7% to $1.04 billion in the quarter. The gross margin contracted 199 basis points (bps) to 23.4%.
Selling, general and administrative expenses fell 7.7% year over year to $137.7 million.
Adjusted operating margin (excluding depreciation, amortization and restructuring and other expenses) contracted 124 bps from the year-ago quarter to 13.3%.
Financial Details
Syneos Health exited 2022 with cash and cash equivalents and restricted cash of $112 million compared with $106.5 million at the end of 2021. Long-term debt at the end of 2022 was $2.61 billion compared with $2.78 billion at the end of 2021.
In the fourth quarter of 2022, the company did not repurchase any common stock. During 2022, the company repurchased $150.0 million of 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 fourth quarter of 2022 was $426.9 million compared with $450.3 million in the year-ago period.
2023 Guidance
Syneos Health provided its full-year 2023 guidance.
The company expects full-year revenues in the range of $4,975-$5,175 million. The Zacks Consensus Estimate for the same is currently pegged at $5.03 billion.
Adjusted EPS for the year is projected in the band of $3.26-$3.53. The Zacks Consensus Estimate for the same is currently pegged at $3.48.
Our Take
Syneos Health ended the fourth quarter of 2022, with better-than-expected earnings and revenues. In Clinical Solutions, revenues declined due to lower net awards and the impact of foreign exchange, partially offset by higher reimbursable expenses. Excluding reimbursable expenses and at CER, Clinical Solutions revenue decline was primarily due to lower net awards and backlog conversion delays, largely offset by growth in large pharma business. The contraction of margins is concerning.
However, Commercial Solutions revenue growth was strong, primarily driven by deployment solutions, including the contribution from its Syneos One portfolio.
Zacks Rank and Key Picks
Syneos Health currently carries a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Cardinal Health, Inc. (CAH - Free Report) , McKesson Corporation (MCK - Free Report) and Hologic, Inc. (HOLX - Free Report) .
Cardinal Health, currently carrying a Zacks Rank #2 (Buy), reported second-quarter fiscal 2023 adjusted EPS of $1.32, beating the Zacks Consensus Estimate by 16.8%. Revenues of $51.47 billion outpaced the consensus mark by 2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cardinal Health has a long-term estimated growth rate of 11.6%. CAH’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 6.4%.
McKesson, with a Zacks Rank #2, reported third-quarter fiscal 2023 adjusted EPS of $6.90, which beat the Zacks Consensus Estimate by 8.8%. Revenues of $70.49 billion outpaced the consensus mark by 0.02%.
McKesson has a long-term estimated growth rate of 10.4%. MCK’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 3.4%.
Hologic reported first-quarter fiscal 2023 adjusted earnings of $1.07 per share, beating the Zacks Consensus Estimate by 18.9%. Revenues of $1.07 billion surpassed the Zacks Consensus Estimate by 9.5%. The company currently sports a Zacks Rank #1.
Hologic has a long-term estimated growth rate of 15.2%. HOLX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 30.6%.