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Syneos Health (SYNH) Up 1.2% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Syneos Health (SYNH - Free Report) . Shares have added about 1.2% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Syneos Health due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Syneos Q2 Earnings Beat Estimates on Balanced Segmental Growth

Syneos Health reported second-quarter 2019 adjusted earnings per share (EPS) of 74 cents, which beat the Zacks Consensus Estimate by 5.7%. The metric also improved 19.4% from the year-ago tally.

Reported EPS share came in at 11 cents, down 15.4% from the year-ago figure.

Revenues in Detail

Service revenues in the quarter totaled $1.17 billion. The top line increased 8.8% year over year and beat the Zacks Consensus Estimate by 1.7%. Per management, revenue growth across key segments drove the top line.

Segmental Details

The Clinical Solutions segment delivered service revenues of $849.9 million in the second quarter, up 8.4% year over year (adjusted revenues up 9.4% at CER). The upside was led by net new business growth,favorable revenue mix and higher growth in reimbursable expenses, partially offset by the adverse impact of foreign currency fluctuation.

Commercial Solutions service revenues came in at $316.9 million in the reported quarter, up 9.8% year over year (adjusted revenues up 10.3% at CER). Net new business growth and the company’s buyout of Kinapse in the third quarter of 2018 drove Commercial Solutions service revenues in the quarter under review.

Margin Details

Direct cost (excluding depreciation and amortization) increased 8.3% to $917.5 million in the quarter. Selling, general and administrative expenses rose 10.6% year over year to $110.9 million. Adjusted operating margin (excluding depreciation, amortization, transaction and integration-related and restructuring and other expenses) expanded 22 basis points from the year-ago quarter to 11.9%.

Financial Details

Syneos Health exited the second quarter of 2019 with cash, cash equivalents, and restricted cash of $107.3 million compared with $107.9 million at the end of the first quarter. Year to date, net cash provided by operating activities was $83.5 million compared with $65.2 million a year ago.

Guidance Updated

For 2019, the company raised the adjusted service revenue guidance to $4.64-4.75 billion, compared with the earlier projection of $4.62-$4.73 billion. The Zacks Consensus Estimate is pegged at $4.67 billion, within the guided range.

For 2019, the company has also raised its adjusted EPS guidance to the range of $3.08-3.26 from the earlier $3.03-$3.23. The Zacks Consensus Estimate for the same is pegged at $3.12, well within the guided range.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

At this time, Syneos Health has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Syneos Health has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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