Medpace Holdings reported Q3 earnings late Monday that blew past Wall Street estimates, accompanied by surprisingly strong guidance for 2023. MEDP stock soared in Tuesday's stock market action.
Medpace earnings also provided a lift to other clinical contract research organization stocks. Iqvia, Icon and Charles River Labs all rose 9%-10%. Veeva, which provides software that helps manage clinical trials, climbed 5%.
Medpace Earnings
Medpace, which conducts clinical trials mostly for small and mid-size biotech and biopharma customers, posted Q3 EPS of $2.05, up 59% from a year ago and 58 cents ahead of estimates. Revenue grew 30% to $383.7 million, beating the consensus by $26.5 million.
In a late Monday note, Jefferies analyst David Windley called the outperformance in EBITDA — earnings before interest, taxes, depreciation and amortization — up 23% to $89.3 million — "almost unbelievable."
Windley characterized 2023 guidance as "profoundly strong." The company sees revenue up 18% to $1.71 billion at the midpoint of guidance vs. estimates of $1.496 billion. EBITDA is seen rising 10.3% to $337.5 million at the midpoint of guidance vs. a $281 million consensus.
Biotech Temperature Check?
The strength of Medpace earnings and guidance came as a surprise partly because the company had noted a soft trend in bids and project awards in recent quarters. Plus, Windley noted that his own industry channel checks have pointed to "slowing decision cycles and study starts" amid a more difficult biotech funding environment.
Medpace CEO August Troendle said in a Tuesday conference call that initial contract award notifications, after a weak Q2, "recovered strongly" in Q3.
"This was a surprising outcome given the continued financial challenges faced by a large fraction of our clients," Troendle said. "We remain concerned that a prolonged period of depressed funding flows will eventually lead to a rapid escalation of project delays."
He said 2023 guidance reflects this caution and slowing growth, though not nearly as slow as analysts expected.
MEDP Stock
Medpace stock vaulted 38% to 218.46 in Tuesday stock market action. Ahead of earnings, MEDP stock had reclaimed its 50-day line around 159.
Tuesday's move carried MEDP stock past resistance at 184.26, which could have provided an entry point. The explosive earnings rally leaves the stock extended for now, but sets the stage for a possible new base to form over the next few weeks.
