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SNC's Low Prices May be a Steal
by : Rajul Kadakia
Senior Research Analyst
Snyder Communications Inc (SNC), a provider of integrated marketing communications services, broke through critical support on high volume this morning. The stock gapped down 7 1/16, or 26 percent, after the company announced second quarter results in line with analysts' estimates yesterday.
8 out of 8 analysts had a "strong buy" rating on the stock until this morning. Several analysts now appear to have mixed reactions about the stock. Both George F. Shipp at Scott & Stringfellow Inc. and Christopher A. Feiss at Deutsche Banc Alex. Brown downgraded the stock this morning. However, Alexia Quadrani at Bear, Stearns & Co. reiterated her "buy'' rating.
The analysts' consensus estimate was for 31 cents per share. The company reported net income for the quarter ended June 30, 1999 of $23.3 million, or 31 cents per share, versus $17.7 million, or 25 cents per share, for the same quarter of 1998, on a pro forma basis. SNC's projected 5-year revenue growth is 30.9 percent versus the industry average of 30.6 percent.
Revenue for the second quarter of 1999 increased 26% to $256 million from $203 million for the same quarter of 1998 which includes revenue from the Healthcare Services Division. SNC's historical 3-year revenue growth is 63.2 percent, almost 2.5 times that of the industry average of 27.2 percent.
The company also announced plans to spin off Snyder Healthcare Services from SNC under the new name of Ventiv Health, Inc. This transaction is expected to be completed in late September. This move seems to be a strong positive for SNC considering Ventiv recorded $321.5 million in revenue for 1998 - generating pre-tax income, exclusive of non-recurring acquisition charges, in excess of $42.6 million. In addition, the company's blue chip clients include all of the world's top 20 pharmaceutical companies such as Abbott Laboratories, Bausch & Lomb, Baxter, Bayer, Bristol-Myers-Squibb, Eli Lilly, Endo Pharmaceuticals, GlaxoWellcome, Johnson & Johnson, Merck, Novartis, Pfizer, Pharmacia & Upjohn, Roche, Sanofi, SmithKline Beecham, Warner-Lambert and Yamanouchi.
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