On Thursday, Baird adjusted the rating for ICON plc (NASDAQ:ICLR) stock, a global provider of outsourced development services to the pharmaceutical, biotechnology, and medical device industries. The firm's rating was lowered from Outperform to Neutral, and the price target was set at $340.00.
The downgrade comes after a period of disappointing performance by ICON, which Coldwell described as one of the worst relative performances observed from the company in a long time. This downturn is particularly surprising given the optimistic investor relations day held by ICON in May.
Coldwell expressed increasing caution regarding ICON's prospects, noting that even the company's ability to protect profit is now in doubt, especially for the year 2024. He indicated that further assessment and adjustments would be made to the company's estimates.
The analyst also mentioned that new scenario modeling and consideration of much lower valuation multiples are leading to an anticipated final price target of approximately $250. This adjustment to the price target is expected to be formalized in a new model that will be released by Baird tomorrow.
In other recent news, ICON plc reported a disappointing Q3, with earnings and revenue falling short of analyst expectations. The healthcare intelligence firm posted adjusted earnings per share of $3.35, missing the consensus estimate of $3.85, and revenue of $2.03 billion, lower than the projected $2.13 billion. Additionally, ICON reduced its full-year 2024 guidance, now forecasting revenue between $8.26-$8.3 billion and an adjusted EPS of $13.90-$14.10, both below analyst estimates.
CEO Dr. Steve Cutler attributed these results to factors such as budget cuts from two major customers and lower vaccine-related activity. Despite these setbacks, ICON reported net business wins of $2.33 billion for the quarter, a book-to-bill ratio of 1.15, and a 9.4% YoY increase in backlog to $24.3 billion. The firm also generated 17.9% more cash from operating activities YoY, amounting to $402.7 million, and repurchased $100 million worth of stock. These are among the recent developments at the company.
InvestingPro Insights
Recent data from InvestingPro provides additional context to Baird's downgrade of ICON plc (NASDAQ:ICLR). The company's current P/E ratio stands at 32.26, which aligns with one InvestingPro Tip noting that ICON is "Trading at a high earnings multiple." This high valuation might be contributing to the analyst's more cautious stance.
Despite the recent downgrade, InvestingPro data shows that ICON has demonstrated a revenue growth of 5.42% over the last twelve months, with Q2 2024 showing a 4.95% quarterly growth. This growth, albeit modest, suggests that the company is still expanding its business, which could be a positive sign for long-term investors.
An InvestingPro Tip highlights that ICON has been "Profitable over the last twelve months," with a basic EPS (Continuing Operations) of $8.66 USD. This profitability, combined with the company's "High return over the last decade" as noted by another InvestingPro Tip, may provide some reassurance to investors despite the current challenges identified by Baird.
For readers interested in a more comprehensive analysis, InvestingPro offers 7 additional tips for ICON plc, providing a deeper understanding of the company's financial position and market performance.
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