Australia Markets closed

Here's Why You Should Retain PerkinElmer (PKI) Stock Now

Zacks Equity Research

PerkinElmer, Inc. PKI continues to benefit from core Diagnostics segment, robust international growth and continued margin expansion. However, forex volatility remains a concern.

The stock currently carries a Zacks Rank #3 (Hold).

Price Performance

Shares of PerkinElmer have gained 5.3%, underperforming the industry’s growth of 12.5% on a year-to-date basis. Meanwhile, the S&P 500 Index rallied 15.3% in the same timeframe.

What’s Deterring the Stock?

At the second-quarter 2019 conference call, management announced that it anticipates foreign exchange headwind of approximately $7 million in the third quarter of 2019 and $53 million for full year.

Meanwhile, on the tariff side, the company confirmed that it expects a headwind of $1 million or less in the coming quarters from China.

Growing exposure to international markets increases the risk of foreign exchange volatility that can negatively impact the company’s international sales.

Factors to Boost PerkinElmer

PerkinElmer continues to benefit from strong performance by Diagnostics segment. In the second quarter, revenues improved both on a reported and organic basis, while operating income increased significantly on a year-over-year basis. Per management, the upside can be attributed to strength across reproductive health, and immunodiagnostics business lines.

The company remains well poised to benefit from a rising middle class in the developing countries of Asia-Pacific and Latin America. Growing demand for affordable healthcare in these regions provide significant opportunity for the company.

Additionally, the company continues to gain traction from its comprehensive suite of scientific informatics and software solutions, which in turn help to aggregate data into actionable insights in an automated and scalable way.

Acquisitions and partnerships have been key catalysts for PerkinElmer over the years. Moreover, acquisitions made by the company in the last few years have given a substantial boost to the company’s product portfolio.

Further, continued expansion in gross and operating margins buoys optimism. It is encouraging to note that management anticipates operating margin in 2019 to expand by 120-150 bps and is confident about achieving its goal of 22% of adjusted operating margins in 2020.

Which Way Are Estimates Headed?

For 2019, the Zacks Consensus Estimate for revenues is pegged at $2.91 billion, indicating an improvement of 4.8% from the year-ago quarter. For adjusted earnings, the same stands at $4.04 per share, suggesting growth of 11.9% from the year-ago reported figure.

Key Picks

Some better-ranked stocks from the broader medical space are Baxter International Inc. BAX, Amedisys, Inc. AMED and CONMED Corporation CNMD, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Baxter has a long-term earnings growth rate of 12.8%.

Amedisys has a long-term earnings growth rate of 16.3%.

CONMED has a long-term earnings growth rate 14.9%.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.