Evercore ISI Upgrades ICON plc (ICLR) to Buy
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Evercore ISI upgraded ICON plc (NASDAQ: ICLR) from Hold to Buy with a price target of $89.00 (from $81.50).
Analyst Ross Muken commented, "ICLR's P/E multiple stepped down from the high-teens / 20x range over the past several years (premium to peers) to the low to mid teens more recently (notable discount) as success at PFE created a sizeable potential customer concentration risk. Furthermore, as investors became concerned with a looming renewal (this past summer) and feared that growth at PFE (peaked at >30% of total revenues) would grind to a halt or turn negative and that OMs could potentially face pressure this exacerbated the concern. However, over the summer we learned that ICLR had renewed PFE and it appears as if fears of a material step-down in EPS were unwarranted. Furthermore, we have gained comfort that PFE is a manageable headwind to revenue growth (we model revenues flat to down 5%), and also contend that bookings success in mid-tier accounts (strong DD) should translate to total revenue growth solidly in the MSD. It is now our belief that as PFE concentration trends toward the mid-20s and eventually sub 20% by 2019 that ICLR's multiple should begin again to re-expand. Based on this view, our recognition of management's track record of operational excellence and bullishness with respect to capital allocation potential, we are upgrading shares to Buy and raising our PT to $89.00 implying attractive upside."
Shares of ICON plc closed at $77.04 yesterday.
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