ICON May Miss Revenue Guidance, But Baird Still Bullish

Baird Equity Research analysts Eric Coldwell, Evan Stover and Michael Polark reiterated ICON PLC ICLR shares as a top pick for investors looking for value. The brokerage maintains its Outperform rating with a price objective of $83 on the company's shares.

The three analysts expect ICON to slash its revenue outlook for the full year while announcing second-quarter financial numbers. However, they believe the company will reiterate its EPS forecast. As a result, the brokerage thinks "analysts may finally gravitate to reasonable revenue targets."

Baird said, "ICLR will be hard to fight with active buybacks, cleared headwinds, and juicy valuation. Specifically, we chopped our Pfizer contribution and modestly increased contributions from all other clients. ICLR appears very inexpensive, we expect a material share repurchase announcement soon."

Related Link: ICON Reveals Service Deal With Pfizer

The brokerage felt comfortable with its model of EPS for the period 2016–2018. They are looking for the company to achieve EPS of $4.70, $5.15, and $5.70 respectively for the years 2016–18. Similarly, the analysts think $1.62–$1.66 billion revenue for 2016 is reasonable, while the formal outlook is $1.67–$1.73 billion. The implied guidance after the first quarter is $1.66–$1.69 billion.

Despite looking for a revenue slash, Baird thinks valuation is very attractive. The analysts pointed out, "Discounted 2016-2017 P/E: 14.2x and 13.0x GAAP P/E vs. peers' adjusted-basis average multiples of 16.7x and 14.8x, respectively. Reasonable, below-average NTM EV/EBITDA and PEG of 10.0x and 1.05x, respectively."

At time of writing, ICON was trading down 0.87 percent on the day at $66.82.