PAREXEL Q3 Earnings & Revs Beat Ests - Analyst Blog
April 30 2014 - 3:00PM
Zacks
PAREXEL International Corporation (PRXL)
reported fiscal 2014-third-quarter adjusted earnings per share of
56 cents, beating the Zacks Consensus Estimate by 3 cents. Earnings
also grew 12% from 50 cents recorded in the year-ago quarter.
Adjusted net earnings grew 9.5% to $32.3 million from $29.5 million
in the prior-year quarter.
On a reported basis, PAREXEL’s net earnings were $34.7 million or
60 cents per share, compared with $29.5 million or 50 cents per
share recorded in the year-ago quarter. Improved gross margin
across all business lines coupled with operating efficiency
propelled strong results during the quarter.
Revenues
Revenues increased 10.4% to $578.0 million from $523.5 million in
the third quarter of 2013, comfortably beating the Zacks Consensus
Estimate of $492 million. Service revenues climbed 8.3% to $492.4
million from $454.5 million in the prior-year period. The positive
impact from foreign exchange movements on revenues in the quarter
was $1.8 million. The HERON acquisition contributed approximately
$2.5 million to revenues in the quarter. On the other hand,
Reimbursement revenues surged 24.1% to $85.5 million.
PAREXEL’s backlog was approximately $4.9 billion at the end of Mar
2014, an increase of 9.4% year over year. The reported backlog
included gross new business wins of $781.6 million, cancellations
of $208.7 million, and a positive impact from foreign exchange
rates of $32.0 million during the quarter. Net new business wins
grossed $572.9 million in the reported quarter while net
book-to-bill ratio was 1.16 in the quarter.
Margins
In the third quarter of fiscal 2014, gross profit increased 18.7%
to $169.2 million while gross margin improved 210 basis points
(bps) to 29.3% from 27.2% in the prior-year quarter.
Adjusted selling, general and administrative (SG&A) expenses
spiked 10.3% to $95.5 million year over year. However, as a
percentage of sales, SG&A expenses remained flat at 16.5%.
Adjusted operating earnings escalated 42.5% to $53.2 million in the
reported quarter while adjusted operating margin grew 210 bps to
9.2% from 7.1% recorded in the prior-year quarter.
Segment Details
On a geographic basis, The Americas; Europe, Middle East &
Africa (EMEA), and Asia/Pacific contributed 49.8%, 37.6% and 12.6%
to service revenues, respectively. Service gross margin grew
impressively by 300 basis points (bps) to 34.4% from 31.4% in the
prior-year quarter.
Service revenues from Clinical Research Services
(CRS) rose 9.0% year over year to $373.2 million. Gross profit
increased 23.5% to $118.0 million while service gross margin from
this segment expanded 370 bps to 31.6%. Year-over-year revenue
growth was driven partly by productivity and efficiency-related
investments made in this business.
PAREXEL Consulting Services (PC) service revenues
increased 2.5% to $51.9 million. Gross profit rose 6.3% to $21.5
million, while gross margin improved 150 bps to 41.4%.
Service revenues from the Perceptive Informatics
(PI) segment increased 9.4% to $67.3 million. Gross profit grew
10.8% to $29.8 million and gross margin improved 60 bps to 44.3% in
the quarter.
Balance Sheet
PAREXEL ended the third quarter of fiscal 2014 with cash and
marketable securities of $298.7 million, up 3.6% from $288.4
million as of Mar 31, 2013.
The company’s long-term debt decreased 25.6% to $290.0 million from
$390.0 million as of Mar 31, 2013. Consequently, long-term
debt-to-capitalization ratio fell 11.2 percentage points to 30.2%
from 41.4% a year ago.
Guidance
PAREXEL issued its outlook for the fourth quarter of fiscal 2014
and raised its outlook for the full fiscal year. Management expects
fiscal fourth-quarter reported earnings per share and revenues in
the range of 59 to 63 cents and $507 to $513 million, respectively.
The Zacks Consensus Estimate for revenues of $500 million for the
quarter lies below the guided range.
For fiscal 2014, PAREXEL increased its adjusted earnings per share
guidance to a range of $2.11 to $2.15 from the prior range of $2.01
to $2.11. The current Zacks Consensus Estimate of $2.05 lies below
the guided range. Management also increased reported earnings per
share guidance to a range of $2.13 to $2.17 from the prior range of
$1.99 to $2.09.
PAREXEL also raised its revenue guidance for fiscal 2014 to a range
of $1,936 to $1,942 million from the prior range of $1,920 to
$1,930 million. The current Zacks Consensus Estimate of $1,927
million lies below the guided range.
Our Take
We hold PAREXEL’s earnings and revenue beat for the third
quarter of fiscal 2014 in a positive light. Operational
improvements and positive new business results have led management
to raise its earnings and revenue guidance for fiscal 2014.
Positive momentum in the marketplace, especially with mid and small
clients, combined with healthy backlog and strategic operational
initiatives provide a potential upside for PAREXEL going
forward.
Zacks Rank
Currently, PAREXEL has a Zacks Rank #3 (Hold). Some better-ranked
medical services stocks that are worth considering include
Envision Healthcare Holdings, Inc. (EVHC),
BioTelemetry, Inc. (BEAT) and BG Medicine,
Inc. (BGMD). While Envision Healthcare Holdings and
BioTelemetry sport a Zacks Rank #1 (Strong Buy), BG Medicine
retains a Zacks Rank #2 (Buy).
BIOTELEMETRY (BEAT): Free Stock Analysis Report
BG MEDICINE INC (BGMD): Free Stock Analysis Report
ENVISION HLTHCR (EVHC): Free Stock Analysis Report
PAREXEL INTL CP (PRXL): Free Stock Analysis Report
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