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On Sep 18, we have upgraded our recommendation on PerkinElmer, Inc. (PKI - Analyst Report) to Neutral from Underperform. We are impressed by the company’s second quarter results that beat the Zacks Consensus Estimate on both earnings and revenues fronts as well as its strong international presence and high-growth business model.

Why Upgraded?

On Aug 2, PerkinElmer posted adjusted earnings per share of 51 cents in the second quarter of 2013, beating the Zacks Consensus Estimate by 3 cents. Revenues in the quarter rose 4.1% to $543.3 million, exceeding the Zacks Consensus Estimate of $534 million. The increase was driven by improvements in PKI’s operating segments.

PerkinElmer expects organic revenues to increase in the low-single digit range in the year compared with 2012. PKI also raised the lower-end of the adjusted earnings per share guidance to $2.03 and $2.10 compared with the prior guidance of $2.00 to $2.10.

Following the release of second quarter results, the Zacks Consensus Estimate for 2013 earnings remained the same at $2.07 per share. The Zacks Consensus Estimate for 2014 earnings also remained unchanged at $2.42 per share.

PerkinElmer has a significant international presence, which provides it with diversified revenues and client base.  The company markets its products in more than 150 countries and regions. Further, the company is in the process of transforming its business model to higher-growth offerings through a series of acquisitions and divestitures.

However, PKI operates in a highly competitive industry characterized by rapid technological change and evolving industry standards. Deferred capital expenditures by consumers on account of the constraints in the credit markets may also negatively affect the company.

Other Stocks to Look For

Other stocks that are currently performing well in the medical instruments industry include MELA Sciences, Inc. , Pacific Biosciences of California, Inc. (PACB - Snapshot Report), and Delcath Systems, Inc. . All of them carry a Zacks Rank #2 (Buy).

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