27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.
Pharmaceutical Product Development Inc. (PPDI) recently provided financial guidance for 2011. The company also plans to resume its share repurchase program announced earlier.
Pharmaceutical Product Development expects revenue to range between $1.48 billion and $1.58 billion in 2011, representing a growth of 10%, at the mid-point, above the 2010 level. The Zacks Consensus Estimate of sales of $1.50 billion comes within the company's guidance band.
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The company's outlook is validated by strong bookings posted in the past few quarters. We believe the strength in bookings in combination with its steady backlog duration (at approximately 34 months) will help the company achieve its 2011 revenue target.
Earnings per share are expected in a range of $1.53–$1.69 for 2011, well above the Zacks Consensus Estimate of $1.49. Quarterly earnings are projected in the respective bands of 30–34 cents, 36–40 cents, 41-45 cents and 46-50 cents for the four consecutive quarters of fiscal 2011.
Pharmaceutical Product Development has been controlling expenses effectively and its margins improved impressively in the third quarter of 2010 on a sequential basis. Better expense control and improved margins have helped the company recover from a challenging 2009 and could lead to earnings growth in 2011.
Earlier, Pharmaceutical Product Development had announced plans to repurchase common stock worth $350 million of which $260 million was outstanding at the end of December 2010. The company expects to repurchase around $200 million worth of shares from early 2011 and plans to finance it with cash in hand as well as future cash flow from operations. The repurchase of shares should also help boost the bottom-line.
Cash flow from operations is expected in a band of $200–$250 million in 2011 and capital expenditure in a $85–$95 million range. The effective tax rate is expected to vary from 29% to 31% in 2011.
Our Recommendation
We currently have a Neutral recommendation on Pharmaceutical Product Development. The company retains a Zacks #3 Rank, which translates into a short-term neutral rating. Though we are impressed by the company's strong bookings, stable backlog duration, sound expense control and improving margins, we prefer to remain on the sidelines until we gain some visibility on earnings growth in 2011.
Pharmaceutical Product Development is a leading contract research organization (CRO) providing drug discovery and development services to pharmaceutical and biotechnology companies.
Companies like Pharmaceutical Product Development and Charles Riverlaboratories (CRL) suffered in 2008-2009 due to a decline in demand for their services in time of a depressed economy. We believe a recovery in demand for CROs would augur well for companies like Pharmaceutical Product Development.
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27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.