What happened

Shares of INC Research Holdings Inc. (NASDAQ: INCR) were down 22.9% as of 2:00 p.m. EST Tuesday after the contract research specialist announced disappointing fourth-quarter 2016 results.

So what

Quarterly revenue climbed 0.8% year over year, to $406.1 million, including 9% growth in net service revenue, to $263 million, and an 11.4% decline in reimbursable out-of-pocket expenses, to $143.1 million. On the bottom line, that translated to adjusted net income of $36.9 million, or $0.67 per diluted share, up from $31.4 million, or $0.54 per share in the same year-ago period. Analysts, on average, were modeling roughly the same adjusted earnings per share on higher net service revenue of $269 million.

INC Research logo

Image source: INC Research Holdings.

INC CEO Alistair Macdonald called it a "solid performance in several key growth areas," citing growth in both net service revenue and adjusted EPS. "We also were pleased to achieve two key milestones for the full year," Macdonald went on, "surpassing $1.0 billion in net service revenue for the first time in INC's history and wrapping up the year with a backlog of approximately $2.0 billion."

Nonetheless, Macdonald admitted that new business was below expectations during the quarter "due to delayed client decisions with regard to some of our pending proposals, which negatively impacted rewards."

Now what

To be fair, those proposals haven't been lost yet, so INC could make up ground in the coming quarters. But for now, INC expects full-year 2017 net service revenue in the range of $1.03 billion to $1.10 billion, which should result in adjusted earnings per diluted share in the range of $2.63 to $2.75. By comparison, Wall Street was looking for higher net service revenue of $1.15 billion, and adjusted earnings per share of $2.92.

Given INC Holdings' relative underperformance in Q4 and light guidance -- and with shares having climbed more than 40% in the year leading up to today's report -- it's hard to blame investors for taking a step back from INC Research Holdings stock today.