Medpace is Wednesday's IBD Stock Of The Day. Shares reversed higher Tuesday after a mixed first-quarter report, surging on bullish profit growth and Medpace's reiterated sales outlook.
Now, the stock is eyeing a buy point at 419.42 out of a consolidation, according to MarketSurge.com. Shares retook their 50-day line with an 8.2% jump on Tuesday and, despite falling almost 1% in morning trades on today's stock market, remain above that key mark.
William Blair analyst Max Smock says there was "something for everyone in this print." Revenue and bookings missed analysts' forecasts, while earnings per share "significantly exceeded expectations," he said in a report. Bullishly, Medpace kept its sales guidance for the year and boosted its profit view.
"We are encouraged by management's decision to leave its revenue outlook for 2024 unchanged in spite of the miss," he said. "The lower-than-expected bookings in the quarter could call into question the company's previously communicated expectation for revenue growth to step up in 2025."
Medpace's Exposure To Small Biopharma
Medpace is a contract resource organization, or CRO. It helps biotech, pharmaceutical and medical technology companies run the clinical studies they need to win regulatory approval for their products.
More than three-quarters of Medpace's sales — 78% — are tied to small pharmaceutical and biotech companies, UBS analyst Dan Leonard said in a report to clients. The capital markets are showing strength with biotech funding up 125% in the first quarter.
But that didn't show up in Medpace's results, Leonard said. He maintained his buy rating and 480 price target on Medpace stock.
"We see a path for better funding to have manifested in inquiries, but not yet bookings," he said in the report.
To that point, Medpace booked $615.6 million in new business during the March quarter, lagging the $645 million estimate from William Blair's Smock. Those new business awards climbed 10.8% year over year, but the book-to-bill ratio came in below expectations.
Further, revenue climbed almost 18% to $511 million, but missed projections ranging from $512.4 million to $518 million, according to William Blair and FactSet.
Earnings, Guidance Shine Bright
Below-the-line items were more promising with Medpace notching $3.20 in earnings per share. Profit surged 40% and crushed forecasts for $2.47, according to FactSet.
And, despite the sales miss, Medpace kept its revenue outlook for the year. The company expects sales to come in at $2.15 billion to $2.2 billion — up 14% to 16.7%.
Medpace also raised its earnings outlook and now expects $10.79 to $10.87 per share, easily beating expectations for $10.62, said Leonard, the UBS analyst.
Promisingly, Medpace stock has a perfect Composite Rating of 99, according to IBD Digital. This means its stock outperforms 99% of all stocks when it comes to fundamental and technical measures. The stock also has a strong Relative Strength Rating of 95, a measure of 12-month price performance.
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