PAREXEL International Corp (PRXL) reported adjusted earnings of 69 cents per share in the second quarter of fiscal 2015, outshining the Zacks Consensus Estimate by 9 cents. Earnings surged nearly 35.3% year over year on expanding margins.
Quarter Details
Total revenues were almost flat on a year-over-year basis to $575 million. However, it outpaced the Zacks Consensus Estimate of $501 million. Lower conversion of revenues from backlog primarily led to the bleak top-line growth. Fluctuations in foreign exchange rates also acted as a headwind.
Service revenue grew 2.5% (or 4% in constant currency) to $499.3 million while reimbursement revenue declined 13% to $75.8 million.
On a segment basis, service revenue from the Clinical Research Services (CRS) segment increased 3.7% to $377.4 million while PAREXEL Consulting (PC) service revenue declined 5.5% to $56 million.
PAREXEL Informatics (PI) service revenue came in at $65.8 million, up 2.9% from the year-ago quarter. The increase in the revenues was primarily driven by improved growth in the company’s Medical Imaging, RTSM and EDC businesses.
PAREXEL recorded gross new business wins of $964.4 million, up 15.3% year over year, which were broad-based across its businesses and client segments. Total backlog as of Dec 31, 2014 stood at $5.1 billion, reflecting an increase of 6% year over year.
Gross margin contracted 40 basis points (bps) year over year to 43.1%.
Adjusted selling, general and administrative expenses increased 4.4% on a year-over-year basis to $98.6 million.
Adjusted operating margin expanded 80 basis points (bps) on a year-over-year basis to 10.6%.
Financial Details
Cash and marketable securities were $301.9 million as of Dec 31, 2014, higher than $281.4 million in the last quarter. Long-term debt in the quarter amounted to $347.5 million, compared favorably with $370 million in the previous quarter.
Guidance
Management expects third-quarter fiscal 2015 revenues in the range of $507–$521 million. Earnings (on a reported basis) for the third quarter are expected between 62 and 68 cents per share.
For the full-year, management lowered its revenue guidance to the range of $2.04–$2.07 billion from the earlier guided $2.07–$2.11 billion, primarily owing to recent volatility in foreign exchange rates.
Adjusted earnings for the fiscal year are projected in the band of $2.65–$2.83 per share, higher than the prior expectation between $2.56 and $2.75 per share.
Our Take
Despite foreign currency headwinds to revenue, PAREXEL’s top line exceeded our expectations. We are also impressed with the company’s robust earnings growth, expanding operating margin as well as strong new business wins during the quarter.
However, volatility in foreign exchange rates is expected to adversely affect the company’s top line in the short term.
Zacks Rank
Currently, PAREXEL carries a Zacks Rank #3 (Hold).
Better-ranked medical services stocks include The Advisory Board Company (ABCO), BioTelemetry (BEAT) and BG Medicine (BGMD). Both The Advisory Board Company and BioTelemetry sport a Zacks Rank #1 (Strong Buy), while BG Medicine carries a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment