Deutsche Bank Boosts Quintiles, Equifax With Buy Ratings: Here's Why

• Shares of Quintiles Transnational Holdings Inc Q and Equifax Inc EFX have been trending lower in 2016 and are down 15 percent each.
• Deutsche Bank analysts have upgraded the ratings on both companies from Hold to Buy, while raising the price targets.
• Equifax is poised for robust growth driven by several non-macro factors, while Quintiles shares are trading at a significant discount to its average valuation since 2013, the analysts mentioned.

Equifax

Analyst Paul Ginocchio raised the price target for Equifax from $101 to $111, while mentioning
that Equifax is poised for robust revenue and earnings growth, driven by several company specific factors.

The rating upgrade is attributable to “the strong non-macro related growth drivers, upside/cushion to '16E guidance, and attractive P/FCF multiple for EFX's already embedded '16E rev growth profile,” the Deutsche Bank report mentioned.

The analyst listed five company specific factors that can drive 5 percent revenue growth in a weak macro environment, including the company’s new Social Security Admin contract, TDX’s UK Govt contract, Fannie Mae requirements, ACA compliance revenues and The Veda acquisition.

The EPS estimates for 1Q16 and FY16 have been raised from $1.14 to $1.15 and from $4.96 to $5.05, respectively.

Quintiles Transnational

Analyst George Hill has reduced the price target for Quintiles Transnational from $78 to $71.

Quintiles reported better than expected 4Q EPS of $0.90 with a 12.1 percent year on year growth in its PDEV revenue and 2.2 percent growth in its IHES revenues. The company has guided to FY15 revenue growth of 7-8.5 percent, with EPS of $3.70-3.85.

Hill pointed out that the company’s shares are currently trading at a 20 percent discount to the average valuation since its IPO in 2013.

“We believe the CRO space should be somewhat insulated from the political rhetoric on healthcare and are upgrading the best in class company at a time when the current P/E is in-line with the peer group average,” the analyst added.

Hill expects the recent funding cycle in biotech, stable R&D at various large biopharmaceutical companies and high level of drug approvals to continue to drive demand for late stage clinical trials.
The revenue and EPS estimates for FY16 have been reduced from $4.78 billion to $4.68 billion and from $3.92 to $3.82, respectively, to factor in low PDEV revenue and high corporate cost assumptions.