PAREXEL International Corporation (PRXL), which provides consulting services to the drug and medical device industries, reported record service revenue that climbed 15.6% in its fiscal second quarter. The company has surprised on estimates 4 consecutive quarters by an average of 9.08%. PRXL has a PEG ratio of 0.60.

Company Description

PAREXEL International provides contract research and consulting services to the pharmaceutical, biotech and medical device industries in 51 countries around the world.

The company’s services include helping clients bring new drugs to market through all phases of drug development and commercialization, including regulatory consulting and clinical trials.

Service Revenue Hits Record in the Second Quarter 2009

PAREXEL reported second quarter fiscal 2009 results on Jan 26 and beat Wall Street estimates by 15%. Excluding a charge for a contract termination due to a client bankruptcy, net income rose 15% to $13.1 million, or 23 cents per share, from $11.5 million, or 20 cents, in the year ago period.

Service revenue jumped 15.6% to a record $275.8 million while gross new business wins climbed 32% from the prior September quarter to $459 million.

The company’s backlog also grew by 13% from the year ago period to $2 billion at the end of the second quarter. The backlog includes gross new business wins of $459 million, cancellations of $121 million, which also includes $44 million from the prior client bankruptcy, and a negative impact from foreign exchange rates of $116.5 million.

The company is cautiously optimistic about the rest of calendar 2009.

“While we may experience a slow-down in the small biopharma client segment due to the current condition of the financial markets, I believe that this impact may be offset by an increase in outsourcing levels from larger clients,” said Josef H. von Rickenbach, Chairman and CEO.

“In this regard, many large pharma companies are approaching clinical trials outsourcing more strategically, and look to benefit from our depth of expertise in the drug development process,” he said.

2009 Guidance

PAREXEL provided third quarter fiscal 2009 guidance of earnings per share in the range of 23 cents to 25 cents with service revenue between $273 million and $283 million.

Excluding the terminated contract in the second quarter due to the client’s bankruptcy, full-year fiscal 2009 earnings per share are expected in the range of 94 cents to 98 cents.

Consensus Estimates In-Line with Guidance

Given the company’s guidance range in January, consensus estimates have been holding steady for the third quarter and the full year. Third quarter consensus estimates call for 23 cents per share, at the lower end of the company’s guidance range.

Full-year 2009 consensus estimates are in the middle of the forecast at 96 cents per share.

PAREXEL is scheduled to report third-quarter fiscal 2009 earnings on Apr 28.

Value Fundamentals

PAREXEL International is a Zacks #1 Rank (strong buy). The company is trading at 8.86x forward earnings. It has a price-to-book of 1.44. PRXL also has a solid 5-year average return on equity (ROE) of 10.94%.

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