PAREXEL International Corporation PRXL recently lowered its top-line and bottom-line projection for the fourth quarter (ending June 30, 2015) and fiscal 2015.
The biopharmaceutical outsourcing services company has issued a fresh fiscal 2016 guidance. Additionally, management apprised the commencement of a restructuring program.
Margin Acceleration Program
Per management, the company-wide restructuring activities will help to improve margins over time, which will, in turn, propel higher growth. PAREXEL expects the restructuring activities to be completed by June 30, 2016.
The company-wide restructuring activities are primarily designed to improve the productivity and efficiency of the company and enhance client engagement.
The company expects annual pre-tax savings of $20–$30 million in fiscal 2016. In other words, it is expected to add 25–37 cents to the fiscal’s adjusted earnings per share. Once the program is concluded, management expects to achieve annual pre-tax savings of approximately $50–$60 million.
The company expects to incur pre-tax charges in the range of $35–$45 million in sync with the program. Out of this, $20–$30 million will be incurred in the fourth quarter of fiscal 2015, while the rest will be recorded through fiscal 2016.
The pre-tax charge will primarily include $30–$40 million in employee separation benefits related to the expected expulsion of up to 850 jobs. The remainder of the charge comprises other one-time costs.
Guidance Revision
Fourth-quarter fiscal 2015 revenues are now expected in the band of $517–$533 million, lower than the previously guided $520–$540 million. The estimated projection takes into account the effects of restructuring program, foreign currency exchange rates, anticipated tax rates and recent acquisitions.
Adjusted EPS in the fourth quarter is anticipated to lie in the range of 70–78 cents. In the last quarter’s conference call, the company had refrained from providing its adjusted EPS projection for the fourth quarter of fiscal 2015. However, on a reported basis, EPS was anticipated to lie in the range of 65–81 cents, which is now expected in the band of 50–58 cents.
For fiscal 2015, revenues are expected in the range of $2.010–$2.026 billion, lower than the previously provided projection of $2.012–$2.032 billion. The Zacks Consensus Estimate is currently pegged at $2.028 billion.
Likewise, adjusted EPS is now expected at $2.70–$2.78, as compared to the previous guidance of $2.65–$2.83. The Zacks Consensus Estimate is currently pegged at $2.75.
FY16 Guidance Initiated
In fiscal 2016, PAREXEL expects the top line to range between $2.16 billion and $2.21 billion. The Zacks Consensus Estimate presently stands at $2.214 billion.
Adjusted EPS is expected to lie in the range of $3.02–$3.38. The Zacks Consensus Estimate is currently pegged at $3.24.
Long-Term Outlook
Management expects long-term adjusted operating margin in the range of 12%–14% to 13%–15% of service revenues.
Zacks Rank
Currently, PAREXEL has a Zacks Rank #3 (Hold). Better-ranked medical stocks at the moment include AMN Healthcare Services AHS, Cancer Genetics CGIX and INC Research Holdings INCR. All the three stocks sport a Zacks Rank #1 (Strong Buy).
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