Quintiles IMS Holdings, Inc. :Q-US: Earnings Analysis: Q3, 2016 By the Numbers : November 3, 2016

Quintiles IMS Holdings, Inc. reports financial results for the quarter ended September 30, 2016.

We analyze the earnings along side the following peers of Quintiles IMS Holdings, Inc. – ICON Plc, PAREXEL International Corporation and Thermo Fisher Scientific Inc. (ICLR-US, PRXL-US and TMO-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 1,497.17 million, Net Earnings of USD 99.17 million.
  • Gross margins widened from 28.85% to 28.90% compared to the same period last year, operating (EBITDA) margins now 13.29% from 14.92%.
  • Year-on-year change in operating cash flow of -8.03% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings declined although operating margins improved from 12.62% to 13.29%.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2015-09-30 2015-12-31 2016-03-31 2016-06-30 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 1425.63 1522.33 1493.33 1556.26 1497.17
Revenue Growth (%YOY) 1.87 7.81 10.61 7.66 5.02
Earnings (mil) 111.29 104.57 106.67 86.76 99.17
Earnings Growth (%YOY) 20.11 18.26 23.46 2.13 -10.89
Net Margin (%) 7.81 6.87 7.14 5.57 6.62
EPS 0.89 0.85 0.88 0.71 0.82
Return on Equity (%) N/A N/A N/A N/A N/A
Return on Assets (%) 12.07 10.51 10.79 8.74 9.8

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Market Share Versus Profits

Revenues History
Earnings History

Q-US‘s change in revenue this period compared to the same period last year of 5.02% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that Q-US is holding onto its market share. Also, for comparison purposes, revenues changed by -3.80% and earnings by 14.30% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings declined year-on-year largely because of the increases in operating costs. Its operating margins (EBITDA margins) went from 14.92% to 13.29%. This decline in earnings would have been worse except for the fact that the company showed improvement in gross margins, from 28.85% to 28.90%. For comparison, gross margins were 27.63% and EBITDA margins 13.59% in the immediate last period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

Q-US‘s improvement in gross margin has been accompanied by an improvement in its balance sheet as well. This suggests that gross margin improvements are likely from operating decisions and not accounting gimmicks. Its working capital days have declined to 56.51 days from 59.43 days for the same period last year.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

Q-US‘s change in operating cash flow of -8.03% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


Despite an overall improvement in operating (EBIT) margins, the company’s earnings fell. EBIT margins went from 12.62% to 13.29%. The decline in earnings appears to be largely because of one-time items. Pretax margins declined from 10.08% to 9.50%.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Quintiles IMS Holdings, Inc.

Company Profile

Quintiles IMS Holdings, Inc. is a biotechnology company, which engages in healthcare development in the provision of professional services, information technology, and partnering solutions to the pharmaceutical services and healthcare industries. The company was founded by Dennis Gillings and Gary Koch in 1982 and is headquartered in Durham, NC.

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