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PerkinElmer ( PKI - Analyst Report ) reported third-quarter fiscal 2011 adjusted (excluding one-time expenses) earnings per share of 41 cents, beating the Zacks Consensus Estimate of 39 cents and exceeding the year-ago earnings per share of 31 cents. The results exceeded the company’s earlier guidance in the range of 37 cents to 39 cents.
Net income from continuing operations (as reported) rose just 0.6% year over year to $26.7 million (or 24 cents a share) in the reported quarter from $26.5 million (or 22 cents a share) in the prior-year quarter. Net income, on the other hand, rose sharply to $35.3 million (or 31 cents) from $13.4 million (or 11 cents) a year ago.
Revenues from continuing operations were $453.7 million in the reported quarter, up 8% year over year (up 4% on an organic basis), missing the Zacks Consensus Estimate of $470 million.
Sales from the Human Health segment were $207.4 million, up 7% (up 2% on an organic basis) year over year. Revenues from the Environmental Health segment were $628.7 million, up 10% (up 6% on an organic basis).
Company-wide adjusted operating margin at 14.2% was higher than 13.7% in the year-ago quarter. Adjusted operating margin for the Human Health segment was 19.5%, up 20 basis points (bps) year over year. Adjusted operating margin for the Environmental Health segment was 12.2%, lower 100 bps year over year.
The company has updated its adjusted earnings per share forecast for fiscal 2011 to a slightly higher range of $1.66 to $1.68 (earlier $1.64 to $1.68). Reported earnings from continuing operations are forecast in the range of 94 cents to 96 cents. Organic revenue is still expected to increase in the mid single digits. The Zacks Consensus Estimates for earnings and revenues, for 2011, are $1.66 and $1,926 million respectively.
PerkinElmer has established itself as a market leader, particularly in the genetic screening segment, and holds one of top two market share positions in several important subsets of the life sciences technology and genetic screening businesses.
It, however, operates in a highly competitive industry characterized by rapid technological change and evolving industry standards. As a result, the company must make large investments in R&D in order to maintain a competitive pipeline. PerkinElmer competes with Thermo Fisher Scientific ( TMO - Analyst Report ) among others.
The company continues to execute well across all its product lines aided by rebounding markets and cost containment efforts. Its transfer of select manufacturing to China has expanded operating margins. PerkinElmer has increased its productivity and improved product mix in favor of higher value added products. This has led to higher operating margins.
PerkinElmer's exposure to poor end market visibility might result in a relatively unattractive risk-reward trade-off for the stock. Our Neutral recommendation is supported by a short-term Zacks #3 Rank (Hold).
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