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Here's Why You Should Retain PerkinElmer (PKI) Stock Now

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PerkinElmer, Inc. (PKI - Free Report) is well-poised for growth backed by a robust product portfolio and impressive margin expansion. However, forex remains a concern.

The stock has gained 13.1% compared with the industry’s growth of 12.2% on a quarter-to-date basis. Also, the S&P 500 Index has rallied 6.2% in the same time frame.

PerkinElmer — with a market capitalization of $16.26 billion — offers scientific instruments, consumables, and services to pharmaceutical, biomedical, environmental testing, chemical, and general industrial markets worldwide. It anticipates earnings to improve 37.9% over the next five years. Moreover, the company has a trailing four-quarter earnings surprise 37.1%, on average.

Zacks Investment ResearchImage Source: Zacks Investment Research

Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).

Factor Hurting the Stock

Growing exposure to international markets enhances the risk of foreign exchange volatility for the company. The fluctuations in currency exchange rates can adversely impact PerkinElmer’s international sales.

Key Catalysts

PerkinElmer delivers a comprehensive suite of scientific informatics and software solutions to aggregate data into actionable insights in an automated and scalable way.

Per management, PerkinElmer spent an incremental $25 million on people and digital capabilities and invested more than $200 million in research and development (R&D). This will enable the company to continue building a robust pipeline of new products across a full suite of technologies.

With respect to COVID-related product launches and approvals, in March 2021, the company introduced two Research Use Only (RUO) solutions — PKamp VariantDetect SARS-CoV-2 RT-PCR Assay and Next Generation Sequencing-based NEXTFLEX Variant-Seq SARS-CoV-2 Kit — to detect genomic mutations reported in connection to SARS-CoV-2 variants.

In the same month, PerkinElmer’s company Horizon Discovery expanded its gene editing and modulation portfolio to include a new family of CRISPR modulation (CRISPRmod) reagents for CRISPR interference (CRISPRi).

The company’s gross and operating margin continues to improve on the back of productivity initiatives and volume leverage. The product introductions are expected to improve the product mix, thereby enhancing the gross margin. This coupled with stringent cost control will continue to drive operating margin in the near term.

In the first quarter, adjusted gross profit in the quarter amounted to $809.7 million, up 148.9% year over year. Adjusted gross margin, as a percentage of revenues, was 61.9%, up 1200 basis points (bps) year over year. Adjusted operating income was $541.8 million, which skyrocketed 443.9% from the year-ago quarter. Adjusted operating margin, as a percentage of revenues, was 41.4%, up 2610 bps.

Estimates Trend

For 2021, the Zacks Consensus Estimate for revenues is pegged at $4.37 billion, indicating growth of 15.4% from the year-ago period. The same for adjusted earnings per share stands at $9.30, suggesting an improvement of 12.1% from the prior-year reported figure.

Stocks to Consider

Some better-ranked stocks from the broader medical space are HCA Healthcare, Inc. (HCA - Free Report) , DaVita Inc. (DVA - Free Report) and Amedisys, Inc. (AMED - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

HCA Healthcare’s long-term earnings growth rate is expected at 12.3%.

DaVita’s long-term earnings growth rate is estimated at 14.4%.

Amedisys’ long-term earnings growth rate is projected at 12%.

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Amedisys, Inc. (AMED) - free report >>

DaVita Inc. (DVA) - free report >>

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HCA Healthcare, Inc. (HCA) - free report >>