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Modest Q4 Earnings for Pall Corp

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Pall Corporation (PLL) reported fourth quarter fiscal 2013 pro forma earnings of 90 cents a share, 2.3% above the Zacks Consensus Estimate of 88 cents. Earnings for the quarter also surpassed the prior-year quarter’s earnings of 86 cents a share by 4.7%. The reported EPS included a 3 cents negative impact from foreign currency translation.

For fiscal 2013, Pall reported earnings of $3.04 a share, a penny above the Zacks Consensus Estimate. Fiscal 2013 earnings were also up 8.6% from fiscal 2012.

Despite economic headwinds in some of Pall’s industrial end markets, the company reported profits attributable primarily to improved operational execution and favorable impact from the structural cost actions.  


Total revenue in the quarter declined marginally by 0.8% year over year to $716.8 million, but edged past the Zacks Consensus Estimate of $715 million. Decline in the top line was primarily attributable to weak industrial sales during the quarter. However, sales in local currency managed a nominal gain from prior year.   

Segment Revenues

The Life Sciences segment revenues climbed 6% in local currency to $354 million in the reported quarter. This increase was driven by a 6% rise in Biopharmaceuticals and a 5% improvement in Medical, driven by strong growth in the Biotech sector and strong sales in Hospital Critical care and blood Media, respectively. This was partially offset by lower sales in the Food & Beverage division - attributable to weakness in China and Europe.  

Revenues for the quarter in the Industrial segment dropped 5% year over year in local currency to $363 million. The decline was attributable to lower sales in two of its three sub-divisions. Process technologies sales were up 1% in local currency driven by strength in Fuels & Chemicals. During the quarter, Aerospace was the weak performer and it reported a 10% decline in local currency year over year. The decline was because of weakness in military aerospace, which in turn was attributable to non-repetition of helicopter orders. Aerospace segment of Pall in the fourth quarter of 2012 benefitted from the strong helicopter program.  Similarly, micro electronics segment sales declined 7% in local currency. The decline was primarily due to the continuing weakness in display and data storage end-markets.


Gross margin in the quarter remained flat year on year at 51.5% of sales. The operating margin contracted to 18.8% in the quarter from 19.3% in the prior-year quarter. Decline in operating margin was attributable to higher investments in R&D.       

Cash Flow and Balance Sheet

Exiting the year, cash and cash equivalents were $936.9 million compared with $500.3 million in the prior-year quarter. Pall had a long-term debt of $467.3 million as on Jul 31, 2013 compared with $490.7 million as on Jul 31, 2012. Further, the company’s debt to capitalization ratio declined from 24.5% in 2012 to 20.5% in fiscal 2013, which also indicates good debt management.  

Operating cash flow for fiscal 2013 was $384 million, down 19.2% from $475 million as on Jul 31, 2012. The reduction primarily reflects income tax payments associated with the settlement of several years of U.S. tax audits and gain from the sale of the company’s Blood business.

Capital expenditure for the year was $110 million, which was down 30.7% compared to fiscal 2012. Also, Pall repaid $358 million to its shareholders during fiscal 2013, which was divided as $108 million for dividend payments and $250 million of share repurchases.


The company also provided its guidance for fiscal 2014. Pro forma earnings for fiscal 2014 are expected in the range of $3.30 to $3.50, while revenues for the year are expected to grow in the low to mid-single digit range.

Pall has a Zacks Rank #4 (Sell), which might not be a good option at the moment. However, other stocks in the industry worth considering at the moment are Progressive Waste Solutions Ltd. , Sharps Compliance Corp. (SMED - Free Report) and Pure Cycle Corporation . Progressive Waste Solutions carries a Zacks Rank #1 (Strong Buy) while Pure Cycle Corporation and Sharps Compliance carry a Zacks Rank #2 (Buy).

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