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Icon guidance suggests margin improvement in 2013

04-Dec-2012

Guidance issued by Icon is at the lower end of consensus estimates but it still suggests that the CROs margins are set to improve.

The Ireland-based contract research organisation (CRO), which will hold an investor day in New York, US in a few hours, said it expects net revenue for the full year 2013 to be between $1.21bn and $1.24bn and earning to be between $1.40 and $1.55 per share.

The revenue guidance is at the lower end of analysts’ current consensus estimate of $1.24bn, while the earning per share forecast is roughly in line with the average $1.50 prediction.

Icon did not specify what would be its key drivers in 2013, however the forecast does suggest that the recovery seen in the firm’s third quarter financial results  will continue.

In the period, Icon's revenues increased 18.6 per cent to $285.5m and operating margins improve thanks to recovering demand for central labs and $450m worth of new business.

Analyst response

ISI Group analyst Ross Muken called the 2013 guidance solid, indicative of an improved operating profile and said it suggests that Icon "is now executing on its margin improvement plan.”

He also suggested that recovery of Icon’s central lab business, coupled with the expected benefits of its strategic alliance with US drug giant Pfizer are likely to be the key drivers for the CRO next year.

John Kreger from William Blair and company was of a similar opinion. He said that while the guidance was slightly below his expectations it is likely to be welcomed by investors.

We believe that while numbers will likely have to come down by 3-5 cents on the bottom line, investors will be content with this guidance as it implies another year of strong margin expansion and EPS growth.”

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