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Will PerkinElmer (PKI) Disappoint this Earnings Season?

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PerkinElmer Inc. is expected to report fourth-quarter 2016 results on Feb 2, 2017.

PerkinElmer’s track record has been quite impressive, with the company comfortably beating estimates in three of the four trailing quarters. In the last reported quarter, it recorded a positive earnings surprise of 3.03%, bringing the four-quarter average to 3.30%. Over the past three months, PerkinElmer returned almost 2.48%, which is lower than the Zacks categorized Instruments Scientific sub-industry’s gain of roughly 5.36%. However, PerkinElmer has a decent earnings surprise history, as evident from the chart below.

Factors at Play

An expanding product portfolio, margin expansion and accretive acquisitions were thekey positives for PerkinElmerin the fourth quarter. Moreover, partnerships with the likes of Sophie BioSciences, Monash Institute of Pharmacutical Sciences, Good Start Genetics and others are anticipated to drive top-line growth. Diagnostic Business is also expected to prove accretive in the to-be-reported quarter.

However, lower-than-estimated demand in the academic and government segments as well as sluggishness in the developed markets are likely to mar opportunities for PerkinElmer in the fourth quarter. Management expects revenues to represent low single-digit organic growth and areforecast in the range of $610 million to $620 million. Adjusted earnings for the quarter under discussion are projected in the range of 85 cents to 87 cents per share.

Earnings Whispers

Our proven model does not conclusively show that PerkinElmer is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: The Earnings ESP for PerkinElmer is -1.16%. This is because the Most Accurate estimate stands at 85 cents and the Zacks Consensus Estimate is pegged at 86 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: PerkinElmer carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Ranks #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are a few companies that you may want to consider instead, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Cempra Inc. has an Earnings ESP of +15.79% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Molina Healthcare Inc. (MOH - Free Report) has an Earnings ESP of +5.33% and a Zacks Rank #2.

Universal Health Services, Inc. (UHS - Free Report) has an Earnings ESP of +4.97% and a Zacks Rank #2.

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