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Momentum

PerkinElmer, Inc. (PKI)

PerkinElmer Inc. isn’t a company name that rolls off the tongue of the average American.  But their products, services and technologies have been well known in the scientific community for 70 years and most likely have crossed your path at some point, you may have just not known it…

Perhaps their diverse business, which is focused on the periphery of health and human sciences or the lack of just one strong public brand, keeps them hidden from the average investor.  This quiet but strong stock might be worth a look as preventive care, environmental health consciousness and overall safety awareness increases globally.

Company Description & Developments
PerkinElmer is an international company with operations in 150 countries and 7,000 employees.  They are focused on improving the health and safety of people and the environment.

PerkinElmer’s mission ranges from enabling discovery of more effective diagnostics and therapies to making sure that our food, water, consumer products and the places where we live and work are safe from contaminants. They currently hold over 2,900 related patents.

PerkinElmer is divided into two segments: Human Health and Environmental Health.

The human health division develops technologies that touch over 31 million births and pregnancies a year with over 300 million screened to date.  Their pre- and neo-natal screening solutions are widespread, and according to the company save over 50 babies’ lives each day.

In addition, they are the world’s number one cellular imaging technology company and leading supplier of amorphous silicon digital x-ray detectors used to preserve healthy tissue in cancer patients.  They are also the world's leading provider of several solutions for digital x-ray systems and an integral part of enabling research into over 75% of drug pathways for GPCR and Kinase products.

If all this is Greek to you, you’re not alone.  Think about PKI as an indispensible catalyst and technology/solutions provider that helps turn a medical discovery into a viable cure or treatment.  The company simply strives to improve the quality of life for the human race by filling voids and improving various medical processes.  

On the environmental side they produce many environmental monitoring technologies that help keep our planet clean. PKI also provides analytical techniques for several environmentally related industries including Inorganic, Molecular Spectroscopy and Thermal Analysis and Gas Chromatography.

Their instruments and services are essential components for efficient, renewable energy and clean air and water.

Financial Profile
PKI is a mid-cap ($3.08 billion) company that is trading at about 13.5 times forward (expectations for next quarter) earnings.

PKI became a Zacks Rank #1 Strong Buy on February 7th, 2011.  The company reported a quarterly sales increase of 19% at their last earnings report and saw a 51% rise in EPS for the same period.  Annual sales were up 15% compared to (fiscal) FY2010 with total sales of roughly 1.92 billion in FY2011.  PKI earnings dropped from $3.25 in FY2010 to $0.06 in FY2011.  The results for the latest quarter included a $0.40 per share charge related to the recent acquisition of Caliper Life Sciences,  pension liabilities of divested businesses and $0.61 per share of tax charges related to Caliper acquisition.

PKI is expected to earn $2.02 in FY2012 according to the Zacks Consensus Estimate.  The company guided 2012 earnings higher than expectations at their last report on February 2nd. 

Earnings Estimates
PerkinElmer reported a loss for Q42011, but earnings and forecasts were better than expected. Revenues for the quarter grew 15 percent to $540.19 million from $469.97 million in the same quarter last year.

During the year PKI saw a huge jump in general and administrative expenses, most likely due to their acquisition.  They did see growth in both divisions with human health up 20% and environmental up 11% for the year. PerkinElmer has surprised analysts to the upside for the past 4 quarters an average of 11.26%.

Expectations are for PKI to generate $0.41 in income this quarter.  Of the 9 analysts who cover PKI, the consensus is for the company to grow earnings by 10% in the current year (FY2012) and roughly 13% in FY2013. 

In terms of the magnitude of analyst estimate trends, we are seeing all of the consensus estimates higher than they were 90 days ago for the current and next quarters, as well as for FY2012 and FY2013. 

PerkinElmer reports Q12012 results on May 10th.

Market Performance & Technicals
Over the past three months, PKI’s charts would be the textbook definition of momentum.  Unfortunately, they would also be the textbook definition of overbought, having risen 59% in that period.

On the surface, it looks like a scary trade to make given the non-stop bullish action the shares have seen, but given the reasonable earnings multiple and strong fundamental story it might not be such a bad deal.  The shares are still about $2 away from their 52-week highs of almost $59 made back in mid-2011.  The company’s strong 2012 guidance should also add a bit of comfort to the trade.  A breakout above that level could give the stock another boost.

From a technical standpoint, there is support down at the $23 level which coincides with some tops made back in August and September of 2011, as well as the 50- and 200-day moving averages which are crossed right around that level.  The 50-day stands at $23.13 and the 200 at $22.70. 

PKI has matched the S&P 500’s performance in the past year but outpaced it by over 30% in the past 3 months with its meteoric rise.  PKI has maintained its momentum in the past couple weeks, leading the index by about 10%.    

With a beta of .96 you can typically expect the stock to move in relation to the broad market with the same volatility.  It was interesting to note that PKI moved right at the same pace as the S&P over the past year, but it was much more volatile and seemed disconnected at times.

The story remains positive for PKI -- that is, if the market doesn’t steal the jam out of its donut.

Jared A Levy is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Whisper Trader Service.

 

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