Icon Reports Strong Q4 Results

Icon ICLR reported strong fourth-quarter results highlighted by revenue of $1.9 billion, representing an increase of 4% from the prior-year period. Full-year revenue of $7.7 billion represented an increase of 41% over 2021, thanks to the contribution of Icon’s acquisition of PRA Health Sciences. We have increased our fair value estimate to $234 per share from $223, which is primarily due to continued strong demand and the time value of money since our last update. We maintain our narrow economic moat, stable moat trend, and medium uncertainty ratings for Icon. Shares are currently trading in 3-star territory about 4% below our fair value estimate.

We forecast 2023 revenue of over $8.1 billion, representing growth of about 5% over 2021 and adjusted earnings per share of $12.60. We continue to have a positive long-term outlook for Icon, and we forecast high-single-digit revenue growth over the next few years. We anticipate outsourced clinical development from biotech and pharma companies will continue to drive growth for large contract research organizations like Icon.

Icon reported net business wins for the year of $9.45 billion and a net book-to-bill ratio of 1.22. Icon’s backlog grew to a record $20.7 billion, representing an increase of nearly 9% year over year. In comparison, IQVIA’s research and development solutions backlog grew 9.6% from 2021 to $27.2 billion and the company reported a year-end book-to-bill ratio of 1.36 times. Syneos has experienced some company-specific challenges and reported a year-over-year decline of 12.4% in its clinical solutions backlog by ending the year with nearly $9.3 billion and a year-end book-to-bill ratio of 0.70 times.

We appreciate that Icon has continued to focus on paying down debt from its 2021 acquisition of PRA Health Sciences for $12 billion. The company ended the fourth quarter with a net debt to trailing 12-month adjusted EBITDA ratio of 2.9 times, which is down substantially from 3.4 times at the end of 2021.