Here's Why Investors Should Retain ICON (ICLR) Stock Now
ICON plc ICLR is well-poised to grow in the coming quarters, driven by its meaningful strategic additions to boost growth. The company is committed to advancing innovative solutions to improve developmental outcomes for its customers. Strong, stable solvency buoys optimism. Meanwhile, concerns remain over the adverse macroeconomic impacts as well as currency fluctuations, which may hamper ICON’s performance.
In the past year, this Zacks Rank #3 (Hold) stock has rallied 57.5% compared with the industry’s 6.8% rise and the 26.2% increase of the S&P 500 composite.
The leading healthcare intelligence and clinical research organization has a market capitalization of $26.46 billion. The company’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 0.8%.
Let’s delve deeper.
Tailwinds
Strategic Pacts to Drive Growth: ICON is focused on expanding its business through strategic acquisitions and partnerships. It is evolving its collaboration and delivery models and investing in technology to improve data integration across service areas, and project and program management capabilities. ICON continues to improve its scientific and therapeutic expertise in areas like oncology, rare diseases, dermatology, infectious disease and women's health.
In January 2024, the company’s acquisition of HumanFirst is strategically aligned with its approach to providing an enhanced integrated offering. Last year, it acquired Philips Pharma Solutions, a leading provider of medical imaging and cardiac safety monitoring services. ICON also partnered with the U.S. Biomedical Advanced Research and Development Authority, part of the Administration for Strategic Preparedness and Response within the U.S. Department of Health and Human Services, to execute a clinical trial to evaluate the effectiveness of the next-generation COVID-19 vaccine candidates.
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Enhancing Innovative Solutions: ICON is dedicated to innovation and advancement to help customers improve their development outcomes. Recently, the company introduced the newest version of the ICON digital platform, which includes updates to essential features and also integrates several other Icon solutions. In 2023, ICON furthered investments in AI and automation with the development of the Firecrest site and investigator database.
The company received the upgraded credit rating from Moody's in December, marking ICON's second upgrade to an investment-grade rating in the fourth quarter following the S&P Global Ratings upgrade in October. Additionally, ICLR is making considerable advancements with robotic process automation, aiming to process 3.5 million hours of activity in 2024 in areas such as data mastering, systems integrations and document handling.
Strong Solvency Position: ICON exited the first quarter of 2024 with cash and cash equivalents of $396.1 million and no debt on its balance sheet. This is good news, particularly during an overall challenging macroeconomic scenario when the company is faced with a manufacturing and supply halt globally.
Headwinds
Macroeconomic Pressure Stays: Inflation and rising labor costs could increase the cost of ICON services, which it may not be able to recover from its customers. A sustained increase in these costs may require the company to hike the price of future service offerings. These actions could adversely affect ICON's future revenues, gross margin or both. In the first quarter of 2024, ICON registered an increase of 2.4% in the direct cost.
Foreign Exchange Translation Impacts Sales: Foreign exchange is a major headwind for ICON as it prepares its financial statements in U.S. dollars, while some of its subsidiaries operate in other currencies like the pound sterling and the euro. In addition, the company's contracts with clients, as well as expenses, are in various local currencies, exposing them to fluctuations in exchange rates. These could have a material adverse effect on ICLR’s financial results. In 2023, ICON registered a foreign currency exchange translation loss of $12.9 million.
Estimate Trend
The Zacks Consensus Estimate for ICON’s 2024 earnings per share (EPS) has remained constant at $14.97 in the past 30 days.
The consensus estimate for the company’s 2024 revenues is pegged at $8.62 billion. This suggests a 6.1% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Hims & Hers Health HIMS, Medpace MEDP and ResMed RMD.
Hims & Hers Health’s earnings are expected to surge 263.6% in 2024 compared with the industry’s 16.9%. HIMS’ earnings surpassed estimates in three of the trailing four quarters and missed in one, the average surprise being 79.2%. Its shares have surged 86.1% against the industry’s 25.5% decline in the past year.
HIMS sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Medpace, also sporting a Zacks Rank #1 at present, has an estimated 2024 earnings growth rate of 27.1% compared with the industry’s 13.4%. Shares of MEDP have rallied 91.2% compared with the industry’s 6.8% rise over the past year.
MEDP’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 12.8%. In the last reported quarter, it delivered an average earnings surprise of 30.6%.
ResMed, carrying a Zacks Rank #2 (Buy) at present, has an estimated fiscal 2024 earnings growth rate of 18.6% compared with the industry’s 12.6%. Shares of RMD have fallen 1% against the industry’s 3.8% rise over the past year.
RMD’s earnings surpassed estimates in three of the trailing four quarters, the average surprise being 2.8%. In the last reported quarter, it delivered an average earnings surprise of 10.9%.
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