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Why Medpace Holdings Is Skyrocketing 13.5% Higher Today

What happened

After reporting second-quarter financials that beat industry watchers' estimates, Medpace Holdings (NASDAQ: MEDP) shares are soaring 13.5% higher at 11:55 a.m. EDT on Tuesday.

So what

Investors were concerned revenue and profitability would be crimped by reduced clinical trial activity because of COVID-19 precautions. Safety measures limiting risk to clinical trial participants and workers did weigh down the healthcare company's second-quarter performance, but not nearly as badly as feared.

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IMAGE SOURCE: GETTY IMAGES.

Medpace Holdings' revenue dipped 4.3% to $205 million, but that was $23.8 million better than analysts were modeling. And while net income margin declined to 11.8% from 12.8% last year, earnings per share still clocked in at $0.64, which was $0.28 better than was expected. Management won $254.1 million in new business in the quarter, giving it a book-to-bill ratio of 1.24.

Now what

Medpace generates about 84% of its revenue from project management, monitoring, data safety, and medical and reporting, and that means its top-line performance is meaningfully impacted by clinical trial activity, including patient enrollment and monitoring.

In Q1, management warned that sales and earnings would fall in 2020 because of declining activity and trial cancellations because of COVID-19. The company's second-quarter results, however, were good enough for it to offer up a rosier outlook. Management is now forecasting revenue growth of 2.8% to 6.9% and GAAP-accounting earnings per share of at least $3.62.

Given that strong second-quarter results suggest its efforts to shift clinical trial services to virtual from on site are contributing to fewer cancellations and delays, Medpace's ability to weather the current environment successfully makes it an intriguing stock to consider buying.

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Todd Campbell has no position in any of the stocks mentioned. His clients may have positions in the companies mentioned. The Motley Fool owns shares of and recommends Medpace Holdings, Inc. Common Stock. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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