Why Is IQVIA (IQV) Up 2.6% Since Last Earnings Report?

A month has gone by since the last earnings report for IQVIA Holdings (IQV). Shares have added about 2.6% in that time frame, underperforming the S&P 500.

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

IQVIA Surpasses Q1 Earnings & Revenue Estimates

IQVIA Holdings reported solid first-quarter 2020 results, wherein the company’s earnings and revenues surpassed the Zacks Consensus Estimate.

Adjusted earnings per share of $1.50 beat the consensus mark by 1.4% but decreased 1.9% on a year-over-year basis. The reported figure lies within the guided range of $1.46-$1.51.

Total revenues of $2.75 billion outpaced the consensus estimate by 1.4% and increased 2.6% year over year on a reported basis and 3.7% on a constant-currency basis. The reported figure came above the guided range of $2.71-$2.74 billion.

Segmental Revenues

Revenues from Technology & Analytics Solutions (TAS) totaled $1.12 billion, up 3.9% on a reported basis and 5.5% on a constant-currency basis. The segment accounted for 41% of total revenues.

Research & Development Solutions (R&DS) revenues of $1.44 billion increased 1.8% on a reported basis and 2.4% on a constant-currency basis. The segment contributed 52% to total revenues.

Revenues from Contract Sales & Medical Solutions (CSMS) totaled $196 million, up 1.6% on a reported and 2.6% on a constant-currency basis. The segment accounted for 7% of total revenues.

Operating Performance

Adjusted EBITDA was $562 million, down 4.3% year over year. Adjusted EBITDA margin decreased to 20.4% from 21.9% in the year-ago quarter.

Operating income was $193 million, down 8.8% from the year-ago quarter. Operating income margin decreased to 7% from 7.8% in the year-ago quarter.

Balance Sheet and Cash Flow

IQVIA exited first-quarter 2020 with cash and cash equivalents balance of $927 million compared with $837 million at the end of the prior quarter. Long-term debt at the end of the quarter was $11.9 billion compared with $11.5 billion at the end of the previous quarter.

The company generated $163 million of cash from operating activities in the reported quarter and CapEx was $141 million.

Share Repurchase

During the reported quarter(prior to the coronavirus outbreak turning into a pandemic in March), the company had repurchased shares worth $321 million, including the purchase of one million shares in connection with the February 2020 private resale by certain stockholders.

After the coronavirus was declared a pandemic in March, the company temporarily suspended its share repurchases. As of Mar 31, 2020, the company had nearly $1 billion of share repurchase authorization remaining.

Second-Quarter 2020 Guidance

IQVIA expects the second quarter to be affected the most by the COVID-19 crisis. Revenues are expected between $2.37-$2.44 billion. Adjusted earnings per share are expected to be between $1.00 and $1.09. Adjusted EBITDA is anticipated between $445 million and $470 million.

2020 Guidance

IQVIA lowered its full-year guidance. The company now projects adjusted earnings between $5.75 and $6.10 compared with the prior guidance of $7.15 and $7.35 per share. Revenues are now expected between $10.6-$10.9 billion compared with the prior guidance of $11.8 billion and $12 billion. Adjusted EBITDA is now anticipated between $2,200 million and $2,300 million compared with the prior guided range of $2,565 - $2,620 million. The guidance includes the total estimated impact from general business disruption caused by the COVID-19 virus and around $75 million unfavorable foreign currency impact on revenues.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -11.71% due to these changes.

VGM Scores

At this time, IQVIA has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, IQVIA has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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