Syneos Health SYNH is progressing well with its growth strategies like pursuing collaborations and driving segmental performance. However, a strict regulatory environment and tough competition are likely to offset the positives to some extent.
This leading provider of biopharmaceutical solutions has a market capitalization of $6.73 billion. Its earnings growth rate has been 25.8% for the past five years. Also, the company has a trailing four-quarter positive earnings surprise of 2.7%, on average.
Over the past year, the stock has outperformed its industry. The stock rallied 44.5% compared with the industry’s 10% rise.
Let’s delve deeper into the other factors that justify the company’s Zacks Rank #3 (Hold).
Balanced Segmental Growth: Syneos Health witnessed solid sales growth across all segments in the just-reported fourth quarter. The Clinical Solutions segment service revenue growth was 9.5% year over year, driven by higher revenues from net new business awards and increased reimbursable expenses. Within the Commercial Solutions segment, yearly revenues grew 6.3% on higher revenues from net new business awards, including European expansion and the acquisition of Kinapse. The encouraging trend is expected to continue in the near future.
Partnerships to Add Value: Last November, Syneos Health inked a partnership deal with AiCure (an AI and advanced data analytics company) for faster and smarter trials to optimize patient engagement.In January 2020, Syneos Health inked a collaboration and minority investment deal with Indegene Omnipresence and the company’s next-generation unified customer experience platform. These partnerships are expected to be driving growth for the company throughout 2020.
Syneos One Holds Potential: Syneos One coordinates integrated solutions across the entire clinical development and commercialization processes. Syneos Health aims at accelerating commercial outsourcing with Syneos One. The company is optimistic about the continuation and growth of customer interest in Syneos One.
However, there are a few downsides marring the company’s prospects.
Strict Regulatory Environment:Thebiopharmaceutical industry is governed by extremely stringent governmental regulation in both domestic and global markets. Within the Clinical Solutions business, the FDA regulates the clinical trials of drug products in human enrollments, the form and content of regulatory applications. Globally, the clinical trials are governed by the laws and regulations of the country where those are conducted.
Tough Competitive Landscape: Syneos Health operates in a highly competitive environment, dominated by firms varying from large CROs and smaller specialty CROs, large global communications holding companies, smaller specialized communications agencies, contract sales organizations and a wide range of consulting companies.
The company is witnessing a positive estimate revision trend for 2020 earnings. Over the past seven days, the Zacks Consensus Estimate for 2020 earnings has inched up 0.8% to $3.69 per share.
The consensus estimate for the company’s first-quarter 2020 revenues is pegged at $1.15 billion, suggesting a 3.2% rise from the year-ago reported number.
Some better-ranked stocks from the broader medical space are ResMed Inc. RMD, Medtronic plc MDT and Hill-Rom Holdings, Inc. HRC.
ResMed has a projected long-term earnings growth rate of 12%. It currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Medtronic’s long-term earnings growth rate is estimated at 7.4%. The company presently carries a Zacks Rank #2 (Buy).
Hill-Rom’s long-term earnings growth rate is projected at 11.1%. It currently carries a Zacks Rank #2.
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