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PerkinElmer Beats but Q2 Earnings Fall

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PerkinElmer, Inc. (PKI - Free Report) posted adjusted earnings per share (EPS) of 51 cents in the second quarter of 2013, beating the Zacks Consensus Estimate of 48 cents. However, the top line lagged the year-ago earnings of 53 cents by nearly 4%. Reported EPS fell 17.2% to 24 cents from 29 cents a year ago, mainly due to significant rise in restructuring and contract termination charges.

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 both operating segments.

Adjusted operating income for the quarter declined 5.0% to $85.2 million from $89.7 million a year ago. Adjusted operating margin fell 130 basis points (bps) to 15.6% from 16.9% in the second quarter of 2012.

Segment Results

Revenues from the Human Health segment went up 4.2% to $300.0 million while organic revenues increased 2%. However, adjusted operating income fell 3.3% to $64.4 million compared with $66.6 million in the same quarter a year ago. Adjusted operating margin declined 110 bps to 21.2% in the quarter.

Revenues from Environmental Health rose 4.0% to $243.4 million with a 3% increase in organic revenues. Operating income dipped 34.1% to $19.3 million from $29.3 million in the second quarter of 2012. Adjusted operating margin ebbed 160 bps to 12.5% compared with the year-ago level.

Financial Position

PerkinElmer had cash and cash equivalents of $112.5 million as of Jun 30, 2013, down from $171.4 million as of Dec 31, 2012. Total debt rose to $1.0 billion as of Jun 30, 2013 compared with $940.6 million as of Dec 31, 2012.

In the first six months of 2013, cash flow from operating activities fell significantly by 58.2% to $38.7 million from $92.7 million in the same period of 2012, mainly driven by higher inventories. Capital expenditure (adjusted) almost doubled to $22.9 million compared with $11.4 million a year ago.

2013 Outlook

PerkinElmer expects organic revenues to increase in the low-single digit range in the year compared with 2012. PKI also expects reported earnings per share in the range of $1.40 to $1.47 and adjusted earnings per share between $2.03 and $2.10 compared with the prior guidance of $2.00 to $2.10.

Our Take

PerkinElmer, Inc. is a global technology company which provides products and systems to the telecom, medical, pharmaceutical, chemical, semiconductor and photographic markets. PKI has operations in over 100 countries, and is a component of the S&P 500 Index. Currently, it retains a Zacks Rank #4 (Sell).

Other stocks that are performing well in the medical instruments industry include Hanger, Inc. , LeMaitre Vascular, Inc. (LMAT - Free Report) , and Measurement Specialties Inc. . Hanger and LeMaitre Vascular are Zacks Rank #1 (Strong Buy) stocks while Measurement Specialties retains a Zacks Rank #2 (Buy).

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