ICON Is Now A Strong Buy: Should It Be In Your Portfolio?

On Dec 16, Zacks Investment Research upgraded ICON Public Limited Company ICLR to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?
    
ICON has been witnessing rising earnings estimates on the back of a new FDA project and an increased guidance for fiscal 2014. Moreover, this contract research organization delivered positive earnings surprises in the last 4 consecutive quarters with an average beat of 13.8%. The long-term expected earnings growth rate for this stock is 18.0%.   

Recently, ICON was handed a project by the FDA to develop an industry-standard Patient Reported Outcome PRO measure which can be used in anti-bacterial drug development trials for hospital-acquired bacterial pneumonia (HABP).

The project, which involves creating a HABP PRO instrument, could be a game changer considering HABP is the second most common hospital-acquired infection and is the primary cause of death in intensive care units.

Apart from the new project win, the increased sales and optimistic earnings guidance is also an important cause for the current bullish trends.

ICON reported third-quarter results on Oct 22. Though the company's revenues fell shy of the Zacks Consensus Estimate, adjusted earnings per share of 79 cents managed to beat the Zacks Estimate of 70 cents and also exceeded the year-ago earnings of 45 cents.

Based on its progress, the company raised its earnings per share projection for fiscal 2014 to $2.74–$2.79 from $2.62–$2.68. Revenue guidance was also pulled up from $1,490–$1,530 million to the range of $1,495–$1,515 million.

The Zacks Consensus Estimate for fiscal 2014 increased 4.5% to $2.77 per share as most of the estimates were revised higher over the last 60 days. The current estimate lies within the guidance range provided by the company. For fiscal 2015 also, most of the estimates were revised higher over the same time frame, lifting the Zacks Consensus Estimate by 3.8% to $3.24 per share from $3.12.

Other Stocks to Consider

Other medical service stocks that warrant a look include Charles River Laboratories International, Inc. CRL, Envision Healthcare Holdings, Inc. EVHC and HealthEquity, Inc. HQY. All the three stocks hold a Zacks Rank #2 (Buy).