Analysts Continue To Be Bullish On eResearch Technology

Ahead of eResearch Technology Inc.'s (ERES) earnings on May 3, accumulation was evident from the large blocks of volume being traded as the stock pushed its way higher.

But when the company reported in-line results and issued guidance for the full year 2007 of $.25 to $.30 per share on revenue $95 million to $103 million, the stock fell, most likely because investors were hoping the turnaround would mean eResearch would start beating the numbers and raising guidance.

The company, which provides cardiac safety services that evaluate the safety of new drugs, is in the midst of a turnaround after suffering over the past year from adapting to a new regulatory environment and the addition of competitors. Despite the brief selloff following earnings, the long term outlook and fundamental picture have not changed.

For the quarter, eResearch signed $29.7 million in contract and work orders and management believes that the continued outsourcing of clinical trials will benefit the company. The company's backlog now stands at $101.5 million as of March 31, with the cancellation rate on future contracts decreasing to 15%. eResearch also announced the launch of its EXPeRT 2 operating system and eRT Consulting Practice, services that could help drive revenue growth and improve future earnings.

With the above in mind and new signings on the rise, there will be a decreased need for the company to rely on cost cutting and efficiency improvements to post better earnings numbers. That is why analysts at Friedman Billings reiterated their "outperform" rating and $11 price target and Caris & Co. raised their target to $12 immediately after the earnings report. eResearch shares are currently trading slightly higher by $.06, or .70%, to $8.69 on light volume.

ERES 1-yr chart: