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PerkinElmer (PKI) Down 9.2% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for PerkinElmer (PKI). Shares have lost about 9.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is PerkinElmer due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

PerkinElmer Beats on Q1 Earnings, Hikes '19 Guidance

PerkinElmer, Inc. reported first-quarter 2019 adjusted earnings per share (EPS) of 69 cents which outpaced the Zacks Consensus Estimate by 4.5%. The bottom line rose 9.5% from the year-ago quarter.

Based in Waltham, MA, this leading MedTech company reported revenues of $648.7 million, up 0.7% from the year-ago quarter and improved 5% organically. Adjusted revenues in the quarter came in at $648.9 million, up 0.7% year over year. Notably, the top line beat the Zacks Consensus Estimate of $644 million.

Segment Details

DAS

At this segment, revenues totaled $388.8 million, reflecting a decrease of 1.9% from the year-ago quarter. Organically, the segment grew 2% in the quarter under review. Per management, the first-quarter performance was impacted by several unique timing items. However, solid show by pharma biotech end market contributed to organic revenue growth.

Coming to profits at the DAS segment, the company reported first-quarter 2019 adjusted operating income of $54.3 million, down 6.1% from the year-ago quarter.

Diagnostics segment

Revenues at this segment amounted to $259.9 million, up 5.1% on a year-over-year basis. Adjusted revenues in the segment totaled $260.1 million, up 5% from the prior-year quarter. Organically, the segment grew 9% in the first quarter.

Adjusted operating income in the segment totaled $66 million, up significantly by 25.2% year over year. Per management, the upside can be attributed to strength across reproductive health, applied genomics and immunodiagnostics business.

Geographical Details

Per management’s expectations, the major geographies witnessed a mixed first quarter, with high-single digit organic revenue growth in the United States and mid-single digit organic revenue growth in Asia Pacific (APAC). This was partially offset by a low-single digit organic revenue decrease in Europe. Organic revenue growth in China came in high-single digits (excluding the impact of lost revenues due to the U.S. Government shutdown).

Margin Analysis

Gross profit in the quarter came in at $323.1 million, up 3.1% year over year. Adjusted gross margin, as a percentage of revenues, was 49.8%, up 120 bps year over year.

Adjusted operating margin was $105.2 million, up 9.7% year over year. Adjusted operating margin, as a percentage of revenues, was 16.2% in the quarter, up 130 bps.

2019 Guidance Raised

PerkinElmer expects 2019 adjusted EPS in the range of $4.02-$4.07, up from the previously guided range of $4.00-$4.05. Notably, the Zacks Consensus Estimate of $4.03 lies within the guided range.

Acquisition Update

In the first quarter, the company announced the buyout of Cisbio Bioassays – a leading custom assay service provider. The addition of Cisbio strengthens PerkinElmer’s position in life sciences and diagnostics markets.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months.

VGM Scores

At this time, PerkinElmer has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

PerkinElmer has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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