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Here's Why You Should Hold on to PerkinElmer (PKI) Stock Now
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PerkinElmer, Inc. is well-poised for growth backed by a robust product portfolio and impressive margin expansion. However, forex remains a concern.
The stock has gained 27% compared with the industry’s growth of 21.6% in the last three months. The S&P 500 Index has rallied 7.2% in the same time frame.
PerkinElmer — with a market capitalization of $20.42 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. The company has a trailing four-quarter earnings surprise 24.3%, on average.
Image 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 increases 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, the company spent an incremental $25 million in people and digital capabilities, while investing above $200 million in R&D so that the creation of a robust pipeline of new products across a full suite of technologies continues to progress.
COVID-related products and services contributed $365 million in the second quarter primarily driven by the company’s PCR tests and RNA extraction solutions. Its turnkey Lab-In-A-Lab testing solutions in the state of California and the U.K performed in line with expectations leading to its core COVID products generating revenues of around $155 million in the second quarter.
With respect to COVID-related product launches and approvals, in April 2021, EUROIMMUN — a PerkinElmer company — introduced the SARS-CoV-2 NeutraLISA assay, which is a surrogate neutralization test meant for the identification of neutralizing antibodies against SARS-CoV-2, the pathogen causing COVID-19. The CE marked assay adds to the company’s broad portfolio of COVID-19 diagnostics and is presently available in more than 30 countries that accept the CE mark.
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 second quarter, adjusted gross profit in the quarter amounted to $711.2 million, up 53.3% year over year. Adjusted gross margin, as a percentage of revenues was 57.8%, up 70 basis points (bps) year over year. Adjusted operating income was $411.3 million, which soared 80.2% from the year-ago quarter. Adjusted operating margin, as a percentage of revenues was 33.5%, up 540 bps.
Estimates Trend
PerkinElmer has been witnessing an upward estimate revision trend for 2021. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved north by 4.3% to $9.91.
The Zacks Consensus Estimate for third-quarter 2021 revenues is pegged at $1 billion, suggesting growth of 4.2% from the year-ago reported number.
Image: Bigstock
Here's Why You Should Hold on to PerkinElmer (PKI) Stock Now
PerkinElmer, Inc. is well-poised for growth backed by a robust product portfolio and impressive margin expansion. However, forex remains a concern.
The stock has gained 27% compared with the industry’s growth of 21.6% in the last three months. The S&P 500 Index has rallied 7.2% in the same time frame.
PerkinElmer — with a market capitalization of $20.42 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. The company has a trailing four-quarter earnings surprise 24.3%, on average.
Image 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 increases 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, the company spent an incremental $25 million in people and digital capabilities, while investing above $200 million in R&D so that the creation of a robust pipeline of new products across a full suite of technologies continues to progress.
COVID-related products and services contributed $365 million in the second quarter primarily driven by the company’s PCR tests and RNA extraction solutions. Its turnkey Lab-In-A-Lab testing solutions in the state of California and the U.K performed in line with expectations leading to its core COVID products generating revenues of around $155 million in the second quarter.
With respect to COVID-related product launches and approvals, in April 2021, EUROIMMUN — a PerkinElmer company — introduced the SARS-CoV-2 NeutraLISA assay, which is a surrogate neutralization test meant for the identification of neutralizing antibodies against SARS-CoV-2, the pathogen causing COVID-19. The CE marked assay adds to the company’s broad portfolio of COVID-19 diagnostics and is presently available in more than 30 countries that accept the CE mark.
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 second quarter, adjusted gross profit in the quarter amounted to $711.2 million, up 53.3% year over year. Adjusted gross margin, as a percentage of revenues was 57.8%, up 70 basis points (bps) year over year. Adjusted operating income was $411.3 million, which soared 80.2% from the year-ago quarter. Adjusted operating margin, as a percentage of revenues was 33.5%, up 540 bps.
Estimates Trend
PerkinElmer has been witnessing an upward estimate revision trend for 2021. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved north by 4.3% to $9.91.
The Zacks Consensus Estimate for third-quarter 2021 revenues is pegged at $1 billion, suggesting growth of 4.2% from the year-ago reported number.
Stocks to Consider
Some better-ranked stocks from the broader medical space are Henry Schein, Inc. (HSIC - Free Report) , Envista Holdings Corporation (NVST - Free Report) and West Pharmaceutical Services, Inc. (WST - 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.
Henry Schein’s long-term earnings growth rate is estimated at 13.9%.
Envista Holdings’ long-term earnings growth rate is estimated at 27.4%.
West Pharmaceutical’s long-term earnings growth rate is projected at 28.4%.