On Monday, Baird adjusted its stock price outlook for IQVIA Holdings (NYSE:IQV), reducing the price target from $223.00 to $213.00, while the firm's stance on the stock remains Neutral. The decision comes as the healthcare data and consulting company has been under performing in both fundamentals and returns, with expectations to fall short of its 2025 Long Range Plan (LRP) by approximately $4 billion.
IQVIA's recent quarterly discussions indicate a pattern of downward revisions spanning three and a half years. Despite a recovery in the Technology & Analytics Solutions (TAS) seen as a positive factor, difficulties persist in the Research & Development Solutions (RDS) and Contract Sales & Medical (TASE:PMCN) Solutions (CSMS) segments.
The analyst pointed out that if one disregards the 2021 COVID-19 related surge, which was compared against simple benchmarks, the RDS segment has only achieved real growth above 6% twice since the company went public in 2013.
The fourth quarter's new business bookings (NBB) already suggest challenges ahead, with cancellations at twice the normal rate. Over the next six to nine months, a slight negative growth in the RDS segment's contract development organization (CDO) is anticipated.
Despite these concerns, the analyst expects a typically optimistic Investor Relations day on December 10, but emphasizes the need for tangible progress before reconsidering their position on the stock.
In other recent news, IQVIA Holdings reported a 4.3% year-over-year growth in its third-quarter revenue, reaching $3.896 billion, and a 14% increase in adjusted diluted EPS to $2.84. Despite a significant cancellation, the company's backlog expanded by 8% year-over-year to a record $31.1 billion. Amid these developments, IQVIA is planning an aggressive share repurchase in Q4 2023.
Analysts from Truist Securities, TD (TSX:TD) Cowen, and BTIG have adjusted their outlook on IQVIA, reducing the price target while maintaining a Buy rating. Truist lowered the target to $265, TD Cowen to $255, and BTIG to $260, reflecting recent developments and the challenging operating environment in the healthcare data and analytics sector.
Despite these adjustments, the firms expressed optimism for IQVIA's future, anticipating positive growth in the Managed Service Provider (MSP) Total (EPA:TTEF) Addressable Market/Research & Development Services (TAS/RDS). These recent developments indicate a dynamic environment for IQVIA, marked by strategic partnerships, financial growth, and analyst adjustments.
InvestingPro Insights
IQVIA Holdings' recent performance aligns with Baird's cautious outlook. According to InvestingPro data, the company's revenue growth has slowed to 3.1% over the last twelve months, with quarterly revenue growth at 4.28% as of Q3 2024. This tepid growth supports the analyst's concerns about IQVIA falling short of its 2025 Long Range Plan.
Despite these challenges, InvestingPro Tips highlight that IQVIA is trading at a low P/E ratio relative to its near-term earnings growth, with a current P/E ratio of 26.19. This could suggest potential value for investors willing to weather the current headwinds. Additionally, the company's management has been aggressively buying back shares, which may indicate confidence in the company's long-term prospects despite current difficulties.
It's worth noting that 14 analysts have revised their earnings downwards for the upcoming period, aligning with Baird's more conservative stance. For investors seeking a more comprehensive analysis, InvestingPro offers 6 additional tips that could provide further insights into IQVIA's financial health and market position.
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