IQVIA Earnings: Strong Outsourced Clinical Trial Demand Drives Growth; Shares Undervalued

IQVIA IQV reported third-quarter results highlighted by revenue of $3.7 billion, representing a nearly 5% increase versus the prior year. We maintain our fair value estimate of $250 per share, and we view the stock as undervalued, currently trading in 4-star territory about 26% below our fair value estimate.

As seen in the previous quarter, IQVIA’s clients have remained cautious with their spending in the commercial business, impacting sales in the technology and analytics segment. However, the clinical business remains resilient, as evidenced by strong demand for outsourced clinical trials. We have a positive long-term outlook for IQVIA, and we anticipate outsourcing from biotech and pharma companies will further drive growth for large contract research organizations. Additionally, we view the $600 million of COVID-19-related revenue stepdown and the negative impact of foreign exchange headwinds as near-term headwinds impacting 2023. IQVIA remains a market leader in the CRO (contract research organization) industry and possesses a healthy backlog, scale, and strong customer relationships to support long-term growth. We forecast mid-single-digit sales growth in 2024, leading to roughly $15.5 billion in revenue. Longer term, we anticipate revenue growth in the midsingle digits to high single digits over our 10-year forecast period.

IQVIA’s strength within the CRO industry and strong customer relationships support its narrow moat rating, which is based on intangible assets and high switching costs associated with running late-stage clinical trials. IQVIA’s research and development solutions backlog stands at a record $28.8 billion, which is up 12% year over year. IQVIA’s R&DS segment achieved bookings of $2.6 billion during the quarter, representing a healthy book-to-bill ratio of 1.24 times.