PAREXEL (PRXL) PT, Estimates Lowered at Evercore ISI
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Evercore ISI analyst Ross Muken lowered his price target on PAREXEL International (NASDAQ: PRXL) to $70.00 (from $79.00) but maintained a Buy rating following results.
The firm cut FY 2017 EPS from $4.05 to $3.75, FY 2018 EPS from $4.80 to $4.55 and FY 2019 EPS from $5.70 to $5.50.
Muken commented: ": This was not a pleasant quarter for anyone involved (unless you are short the stock) as most metrics missed and commentary on the remainder of 2017 did not inspire confidence. However, we think 1Q’17 is PRXL’s rock-bottom moment, with elevated cancellations compounding the negative impact of declining backlog conversion. The silver lining is that the cancellations are due to clients stopping failing projects earlier and much faster than historically and not due to PRXL’s execution (they did not see any share loss). The downside is that cancellations hit the revenue in the Q and caused management to re-group and reset expectations for the year (albeit our revenue and EPS forecast are at the very low end of guidance). We highlight management’s ability mitigate the revenue miss’ impact on margins via their MAP program and believe that when things turnaround, the company could see significant leverage which should translate into high-teens EPS growth. Looking at how shares are responding to today’s print and the stock trading at sub 15x forward EPS multiples (on a calendar basis), we believe the company could be in for a true multiple inflection when management navigates through the various mine fields, continues to execute on the MAP program, and reinvigorates the top-line. We reiterate our buy rating as risk/reward is still asymmetric in our view. Ultimately while this was a major set-back / disappointment we do not think it is unfixable (further management additions would be encouraging."
Shares of PAREXEL International closed at $64.81 yesterday.
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