Kendle (NASDAQ:KNDL) shares surged 7% in recent trading on news that the good times rolled on in the fourth quarter for the provider of drug research services. After Kendle's tremendous liftoff in 2005, its earnings will eventually moderate, but investors can take comfort that the company's near-term future seems based on solid ground.

The Cincinnati-based company indicated that net service revenue for the fourth quarter increased 10% year over year to $52.8 million, while per-share earnings reached $0.25, up 56% from $0.16 per share in 2004's fourth quarter. For all of 2005, net service revenue rose 17% to $202 million, and EPS surged almost 182% to $0.76 from $0.27.

Kendle noted in its conference call that it has phase 3 and phase 3b business to thank for the strength of its recent performance. The nice thing for Kendle is that these advanced-stage trials tend to involve lots of patients and span several years. For Kendle, that means long-term, stable business. That's reflected in the company's 2006 guidance -- revenue is projected to rise 19% to 24% to between $240 million and $250 million. Pro forma earnings, which exclude stock option expenses and other one-time charges, are forecast at $1.40 to $1.50 per share, up 59% to 70% from 2005's pro forma EPS of $0.88.

The company also has been going to great lengths to stress the quality and diversity of its customer base. Kendle is going after clients that can deliver repeat business -- in Kendle's case, that means companies working in multiple therapeutic areas on a variety of products. As for diversity, Kendle noted that its top five customers accounted for 31% of net service revenue in the fourth quarter, down from 41% of net service revenue in the fourth quarter of 2004.

To be sure, Kendle has plenty of competition from companies such as PPD (NASDAQ:PPDI) and PAREXEL (NASDAQ:PRXL). In addition, Kendle still has work to do in improving its operating margins. Nevertheless, in the near term at least, Kendle is on track to continue its impressive performance.

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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.