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Quintiles IMS Holdings Is Firing on All Cylinders

Quintiles IMS Holdings (NYSE: Q), a service and information provider for the healthcare and life sciences industries, reported its third-quarter results on Thursday, Oct. 26. The company's results compared favorably to Wall Street's estimates and management's own guidance range. The upbeat results helped drive the share price to an all-time high.

Let's dig into the details to learn more about what happened during the period.

Image source: Getty Images.

Quintiles IMS Holdings Q3: The raw numbers

Metric

Q3 2017

Q3 2016

Year-Over-Year Change

Revenue

$2.02 billion

$1.14 billion 

77%

Adjusted EBITDA

$512 million

$489 million

4.7%

Adjusted Net Income

$260 million

$739 million

(65%)

Adjusted EPS

$1.19

$3.28

(64%)

EBITDA = Earnings Before Interest, Taxes, Depreciation, and Amortization. EPS = Earnings Per Share. Data source: Quintiles IMS Holdings.

What happened with Quintiles this quarter?

  • Quintiles revenue grew 4.3% year over year to $2.02 billion after adjusting for the impacts of the merger and currency. This landed within management's guidance range and was slightly ahead of what Wall Street had expected.
  • Revenue from Research and Development Solutions grew 7.3% to $938 million. This result was negatively impacted by the company's decision last year to close a facility in Europe.
  • Commercial Solutions revenue grew 4% to $887 million. Growth would have been higher had the company decided not to divest its Encore consulting business earlier in the year.
  • Integrated Engagement Services sales fell 2.3% to $194 million. 
  • Adjusted EBITDA of $512 million came in toward the high end of management's guidance range.
  • Adjusted EPS of $1.19 came in $0.04 above the top end of guidance and bested what market watchers had estimated by a nickel.
  • The company's book-to-bill ratio over the last year is 1.22, and its contracted backlog at quarter end stood at $10.3 billion.
  • Quintiles plowed $557 million into stock buybacks during the quarter.  

What management had to say

Quintiles' CEO Ari Bousbib kept his commentary short in the company's press release: 

Our innovative offerings integrate rich information, advanced analytics, new technologies, and domain expertise on a global basis, driving significant client wins.

However, Bousbib shared a lot of great information with shareholders during the company's investor call. He said he was particularly happy that Quintiles' next-generation products are helping the company land client wins with customers that had been otherwise been dormant:

We are winning R&D business with clients we have done little or no work with in the past. Examples of these accounts that we unlocked this quarter due to next gen include: a top 10 global pharma, who we have done virtually no full-service clinical work with in almost a decade. We won 3 trials with them during the quarter, 2 of which were in oncology. A top 20 global pharma, who predominately insources all of their R&D work. They chose next gen due to our compelling value proposition and differentiated capabilities. This is in the area of NASH, a terrible disease that causes liver inflammation and cirrhosis. A top biopharma who has done nothing with us in the core clinical space for the last 12 years selected QuintilesIMS for their neurology trial. Our next-gen offering was so compelling we were able to displace the incumbent CRO [Contract Research Organization] for this study, and the client also picked us to be a preferred provider.

Looking forward

The upbeat results and encouraging client wins allowed management to share optimistic financial guidance with investors for the upcoming quarter:

Metric Q4 2017 Forecast  Q4 2016 Actual Growth
Revenue $2.12 billion to $2.16 billion $1.953 billion  8.7% to 10.7%
Adjusted EBITDA $560 million to $585 million $541 million  1% to 8%
Adjusted EPS $1.28 to $1.37 $1.09  17.4% to 25.6%

Data source: Quintiles IMS Holdings. 

Investors cheered the strong quarterly results and positive guidance by bidding up Quintiles stock to all-time highs in the trading session following the report.

With a growing backlog, strong financial results, and next-generation products driving new client wins, it isn't hard to figure out why investors are excited about this company's future.

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Brian Feroldi has no position in any of the stocks mentioned. The Motley Fool recommends Quintiles IMS Holdings. The Motley Fool has a disclosure policy.