Tuesday, October 21, 2008

ICON (ICLR) Earnings Look Excellent on Initial Glance

It has been quite awe inspiring to see even the safety sectors hit this badly - one of them should of been healthcare, but there has been so safety in this storm. I've stuck with contract research organization firms in general, despite eroding charts. ICON (ICLR) continues to execute seemingly unaffected by the credit crisis. Unfortunately the chart is not a "buy" until we get back north of $37 or so.

Earnings looked quite impressive today.
  • Net revenues for the quarter were $225.5 million, representing a 35.1% increase over net revenues of $166.9 million for the comparative quarter last year. Year-to-date, net revenues were $645.2 million, representing a 43.4% increase over the same period last year.
  • Income from operations was $27.1 million, compared to $18.7 million for the same quarter last year (+45%). Operating margin increased to 12.0% from 11.2%. was Net income$21.4 million or 35 cents per share on a diluted basis, compared with $14.5 million or 24 cents per share last year. (+46%)
  • For the quarter ended September 30, 2008, cash provided by operating activities was $58 million and capital expenditure was $18.1 million. As a result, the companys net cash amounted to $55.6 million at September 30, 2008, compared to net cash of $6.9 million at June 30, 2008. (we need to watch this for all companies nowadays - we are cash flow positive here)
  • Year-to-date new business bookings, at over $1bn, have also surpassed those of the full year 2007
  • Commenting on the quarter, CEO Peter Gray said " With revenues for the quarter up 35%, margins up to 12%, EPS up 46%, and strong operating cash generation, we are very satisfied with our performance in the quarter. With net new business awarded in the quarter of $350 million and our backlog now at over $1.74 billion, we are confident in the outlook for the remainder of 2008 and view 2009 with optimism"
Many companies not affected by the current issues continue to be pounded into the ground - this is one of them. All we can do is own the ones that have the least exposure and hope fundamentals return to meaning something sooner rather than later.

ICON beat estimates by 3 cents, $0.35 v $0.32 so for year end 2008 their $1.26 estimate can be moved up to $1.29 assuming no beat in fourth quarter (currently $0.34 estimate). At 25x this year's estimate this is not a cheap stock, but its business, theoretically, should be quite immune to world issues - hence some premium should be justified. In fact this is the cheapest it has been in a long while. Doesn't mean it cannot get cheaper - we've seen that all across the board. But until the chart improves it's simply a hold. (and frankly to the technical eye it's a short based on the chart, with an easy stop loss right above resistance)

[Aug 13: Creating a CRO Basket]
[Aug 8: ICON Gets Some Love from Investors Business Daily]
[Jul 22: ICON - they Never Miss and Give us a Chance at Cheap Shares]
[Feb 21: ICON with a Solid Report]

Long ICON in fund; no personal position

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