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On Thursday, Citi analyst Patrick Donnelly adjusted the price target for ICON plc (NASDAQ:ICLR) to $200 from the previous $215, while maintaining a Buy rating on the stock. The revision follows ICON management’s discussion of their guidance framework during a recent call, which now excludes the BARDA trials and takes into account a softer demand environment across its customer bases. The $11.55 billion market cap company currently trades at a P/E ratio of 14.91x, with InvestingPro analysis showing the stock trading below its Fair Value.
ICON’s management outlined the reasons for the reduction in revenue and EPS guidance by approximately $400 million and $0.50, respectively, at the midpoint. Most of the revenue impact is attributed to the next-generation trials. Specifically, management estimated the revenue impact from these trials to be around $350 million, with a single trial cancellation in April anticipated to result in a roughly $300 million reduction in second-quarter bookings. This adjustment comes as InvestingPro data shows 11 analysts have revised their earnings downward for the upcoming period. However, there has been a positive development regarding a second trial, with management actively working with the sponsor to increase activity.
Despite the challenges presented by the softer and unpredictable demand environment, Citi’s analysis suggests that the current stock price already reflects these issues. The firm is reassured by ICON’s ability to maintain EBITDA margins at approximately 20% for the year.
In light of the recent quarterly update and the revised guidance, Citi has reiterated its Buy rating for ICON stock. The new price target of $200 is set in response to the lowered financial projections provided by the company.
In other recent news, ICON plc reported first-quarter earnings that surpassed analyst expectations, with adjusted earnings per share at $3.19 compared to the consensus estimate of $3.18. However, revenue for the quarter was slightly below expectations, coming in at $2 billion against the anticipated $2.03 billion, and reflecting a 4.3% year-over-year decline. The company’s net business wins totaled $2.02 billion, resulting in a book-to-bill ratio of 1.01, while the closing backlog increased by 6% to $24.7 billion compared to the first quarter of 2024. CEO Dr. Steve Cutler noted that the quarter’s performance was affected by market volatility and cautious customer decision-making. ICON updated its full-year 2025 revenue guidance to a range of $7.75 billion to $8.15 billion, indicating a year-over-year decrease of 6.4% to 1.6%. The company also revised its adjusted EPS outlook to between $12.75 and $14.25. During the quarter, ICON repurchased $250 million worth of stock at an average price of $184 per share. As of March 31, ICON’s net debt stood at $2.9 billion, with a net debt to adjusted EBITDA ratio of 1.7x.
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