This Top Pick beat earnings estimates by eight cents last quarter, posting EPS of $0.90 per share.
ICON (ICLR)
from Upside
ICON (ICLR), a contract research organization (CRO), has grown sales by at least 10% in 13 straight quarters, while operating profit margins have expanded in each of the past 11 quarters. The company has topped the consensus profit estimate in 11 consecutive quarters.
That robust track record has failed to alleviate investor concerns over ICON’s high exposure to Pfizer. March-quarter sales from Pfizer surged 30%, while sales to customers outside of Pfizer grew just 3%. As a result, Pfizer accounted for 34% of quarterly sales, up from 29% in the year-ago quarter. Pfizer recently added a third CRO partner, which could hurt ICON’s leverage in negotiations to extend their contract that expires in the middle of 2016.
However, the market’s reaction to ICON’s exposure to Pfizer seems unduly harsh. Many of ICON’s recent contract wins involve full-service contracts, which tend to be more profitable. ICON is projected to grow per-share profits 19% over the next 12 months, more than three times the growth rate for the median life-sciences company in the S&P 1500. Yet the stock trades at just 18 times estimated earnings, well below its peer-group median of 24. ICON remains a Best Buy.
Richard J. Moroney, CFA, Upside, www.upsidestocks.com, 800-233-5922, July 2, 2015