Medpace stock tumbled Tuesday on a series of third-quarter misses that could spell disaster for its 2025 growth prospects.
During the three months ended Sept. 30, Medpace generated $533.3 million in sales. Though sales grew 8.1% on a year-over-year basis, they missed forecasts ranging from $541 million to $545 million, according to analysts' reports and FactSet.
Further, the contract research organization had $534 million in bookings, below expectations for $607 million. That resulted in a book-to-bill ratio of 1.0 vs. analysts' projections for 1.08 to 1.11.
"There was no detail in the company's news release or accompanying earnings decks around the two topics that are at the forefront of investors' minds — that is, the cause of the net bookings miss and what it means for growth in 2025," William Blair analyst Max Smock said in a report.
Medpace stock slouched closed down 7.5% at 326.54. Shares hit their lowest point in eight months.
Lowered Expectations For Medpace Stock
Below the top line, items came in better than expected. Medpace reported adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, of $119 million. That topped Smock's forecast for $108 million. And Medpace earned $3.01 a share, up 36%. Smock projected a lower $2.74, while the Street had a $2.77 estimate.
Medpace lowered its outlook for sales this year to $2.09 billion to $2.13 billion, but raised its EBITDA outlook by $15 million at the midpoint to $450 million to $470 million. The company also hiked its earnings guidance to $11.71 to $12.09 per share.
Still, the book-to-bill ratio miss weighed heavily on Medpace stock. Mizuho Securities analyst Ann Hynes says Medpace shares have been under pressure since the second-quarter report. They've fallen 19%, compared with a 2% gain for the S&P 500 health care stocks as a group.
"The sequential decline in book-to-bill, coupled with a 12.7% year-over-year decline in bookings, is likely worse than investor expectations," Hynes said in a report. "We expect any commentary regarding cancellations and/or initial thoughts on 2025 to be key focuses of (Tuesday's) call."
UBS analyst Dan Leonard says Medpace's 2025 is likely in trouble. He had forecast a "moderate recovery in end market demand driving sequential bookings improvement." But the actual third-quarter featured a 3% sequential decline in bookings.
"Following a sequential booking decline, we no longer expect Medpace can achieve double-digit sales growth in 2025," he said in a report.
He has a neutral rating on Medpace stock.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
