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Syneos Health Grows on New Alliances Amid Regulatory Upheavals

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On Feb 28, we issued an updated research report on Syneos Health, Inc. SYNH. While the company is gaining on balanced segmental growth, a strict regulatory environment is a cause of worry. Syneos Health currently carries a Zacks Rank #3 (Hold).

This global biopharmaceutical solutions company has outperformed its industry in the past six months. The stock has gained 27.2% compared with the industry’s 10.2% rise.

The company exited the fourth quarter of 2019 on an impressive note. We are upbeat about the Clinical Solutions segment’s strong year-over-year revenue growth. Despite adverse currency movements, the segment was aided by solid revenues from net new business awards and higher growth in reimbursable expenses.

The company has been strengthening its end-to-end market position by consistently innovating and expanding the Syneos One product. Strong RFP flow, a diverse portfolio of clinical and commercial initiatives, and sustained customer interest in Syneos Health’s integrated offerings buoy optimism.

The company is also growing through execution of new strategic partnerships. In this regard, last November, Syneos Health inked a partnership deal with AiCure (an AI and advanced data analytics company) to drive faster and smarter trials, in order to optimize patient engagement. Earlier in September, Syneos Health entered into a collaboration as well as engaged in a minority investment in Indegene Omnipresence, which is a customer experience-management platform integrating the power of Microsoft’s AI capabilities into the healthcare industry.

Meanwhile, the contraction in gross margin and decline in Commercial Solutions revenues are worrying. Further, Syneos Health has been exposed to fluctuations in foreign currency. In the last reported quarter, adverse currency movements impacted revenues by 0.7%.

Key Picks

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 #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Medtronic’s long-term earnings growth rate is estimated at 7.4%. At present, the company carries a Zacks Rank of 2.

Hill-Rom’s long-term earnings growth rate is estimated at 11.1%. It also holds a Zacks Rank #2, currently.

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