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Here's Why You Should Retain IQVIA (IQV) Stock for Now
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Shares of IQVIA Holdings Inc. (IQV - Free Report) have risen 12% over the past year, outperforming the 10% growth of the industry it belongs to.
Image Source: Zacks Investment Research
The company has an expected long-term (three to five years) EPS growth rate of 10.4%. Its earnings for 2024 and 2025 are anticipated to grow 9.5% and 11%, respectively, year over year.
Factors That Bode Well
IQVIA's top line is bolstered by the strong segmental performance.The Technology & Analytics Solutions (“TAS”) segment delivered a 4% revenue increase in the second quarter of 2024, excluding COVID-19-related impacts and foreign exchange effects. This growth includes sequential gains in Consulting and Analytics and real-world revenues. Management anticipates TAS revenues to grow by 6-7% for the second half of the year.
Despite large pharmaceutical companies reprioritizing their portfolios, demand for R&D Solutions (R&DS) remains robust. Emerging biotech funding has significantly increased, indicating promising mid-to-long-term prospects for the company. R&DS recorded new bookings totaling approximately $2.7 billion and achieved a record backlog of $30.6 billion, underscoring strong future revenue potential.
Management now expects total revenues for the third quarter of 2024 in the band of $3.83-$3.88 billion and in the range of $15.4-$15.5 billion for full-year 2024.
Moreover, there is a gradual improvement in the commercial sector, with customers prioritizing mission-critical projects such as new drug launches. This positive trend is supported by a significant number of FDA approvals. In the third quarter of 2024, IQV anticipates EPS to range between $2.76 and $2.86 per share.
IQVIA's expansion efforts are commendable. The company's continued investment in AI and machine learning has led to market-leading solutions across various segments, enhancing operational efficiency and client engagement.
In the second quarter of 2024, IQVIA contracted with a top 20 client to expand the implementation of their commercial technology ecosystem. IQV's AI and ML offerings, including analytics and OCE, seamlessly integrate into the client's technology infrastructure, allowing for more effective data management and optimized customer engagement.
Key Risks
IQVIA faces several key risks, particularly in its dealings with large pharmaceutical companies, which have implemented substantial cost-cutting programs and are rigorously reviewing procurement practices. This budgetary caution has made pricing negotiations increasingly challenging, affecting both the commercial and R&DS segments.
Moreover, the increase in operating expenses and low liquidity are exacerbating a strain on the company’s bottom line. In the second quarter of 2024, general administrative and selling expenses increased to $509 million compared to $482 million in the second quarter of 2023.
The current ratio (a measure of liquidity) was pegged at 0.84 at the end of the June quarter of 2024. A current ratio of less than 1 indicates that the company is likely to struggle to meet its short-term obligations. Reduced pricing power is another concern.
The company has an encouraging track record with respect to earnings surprise, having surpassed the Zacks Consensus Estimate in three of the last four quarters and missed once. The average beat is 23.5%. Shares of CRAI have risen 53.7% in the past year.
DOCU currently carries a Zacks Rank #2 (Buy). It has a long-term earnings growth expectation of 7.3%.
The company delivered an earnings surprise of 15.7%, on average, surpassing the Zacks Consensus Estimate in each of the trailing four quarters. Shares of DocuSign have risen 18.6% in the past year.
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Here's Why You Should Retain IQVIA (IQV) Stock for Now
Shares of IQVIA Holdings Inc. (IQV - Free Report) have risen 12% over the past year, outperforming the 10% growth of the industry it belongs to.
Image Source: Zacks Investment Research
The company has an expected long-term (three to five years) EPS growth rate of 10.4%. Its earnings for 2024 and 2025 are anticipated to grow 9.5% and 11%, respectively, year over year.
Factors That Bode Well
IQVIA's top line is bolstered by the strong segmental performance.The Technology & Analytics Solutions (“TAS”) segment delivered a 4% revenue increase in the second quarter of 2024, excluding COVID-19-related impacts and foreign exchange effects. This growth includes sequential gains in Consulting and Analytics and real-world revenues. Management anticipates TAS revenues to grow by 6-7% for the second half of the year.
Despite large pharmaceutical companies reprioritizing their portfolios, demand for R&D Solutions (R&DS) remains robust. Emerging biotech funding has significantly increased, indicating promising mid-to-long-term prospects for the company. R&DS recorded new bookings totaling approximately $2.7 billion and achieved a record backlog of $30.6 billion, underscoring strong future revenue potential.
Management now expects total revenues for the third quarter of 2024 in the band of $3.83-$3.88 billion and in the range of $15.4-$15.5 billion for full-year 2024.
Moreover, there is a gradual improvement in the commercial sector, with customers prioritizing mission-critical projects such as new drug launches. This positive trend is supported by a significant number of FDA approvals. In the third quarter of 2024, IQV anticipates EPS to range between $2.76 and $2.86 per share.
IQVIA's expansion efforts are commendable. The company's continued investment in AI and machine learning has led to market-leading solutions across various segments, enhancing operational efficiency and client engagement.
In the second quarter of 2024, IQVIA contracted with a top 20 client to expand the implementation of their commercial technology ecosystem. IQV's AI and ML offerings, including analytics and OCE, seamlessly integrate into the client's technology infrastructure, allowing for more effective data management and optimized customer engagement.
Key Risks
IQVIA faces several key risks, particularly in its dealings with large pharmaceutical companies, which have implemented substantial cost-cutting programs and are rigorously reviewing procurement practices. This budgetary caution has made pricing negotiations increasingly challenging, affecting both the commercial and R&DS segments.
Moreover, the increase in operating expenses and low liquidity are exacerbating a strain on the company’s bottom line. In the second quarter of 2024, general administrative and selling expenses increased to $509 million compared to $482 million in the second quarter of 2023.
The current ratio (a measure of liquidity) was pegged at 0.84 at the end of the June quarter of 2024. A current ratio of less than 1 indicates that the company is likely to struggle to meet its short-term obligations. Reduced pricing power is another concern.
Zacks Rank
IQV currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
A couple of better-ranked stocks are Charles River Associates (CRAI - Free Report) and DocuSign (DOCU - Free Report) ).
CRAI sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. It has a long-term earnings growth expectation of 16%.
The company has an encouraging track record with respect to earnings surprise, having surpassed the Zacks Consensus Estimate in three of the last four quarters and missed once. The average beat is 23.5%. Shares of CRAI have risen 53.7% in the past year.
DOCU currently carries a Zacks Rank #2 (Buy). It has a long-term earnings growth expectation of 7.3%.
The company delivered an earnings surprise of 15.7%, on average, surpassing the Zacks Consensus Estimate in each of the trailing four quarters. Shares of DocuSign have risen 18.6% in the past year.