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

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

Shares of this currently Zacks Rank #3 (Hold) stock have gained 27.2% compared with the industry’s growth of 21.6% in the past three months. The S&P 500 Index has rallied 5.1% in the same time frame.

PerkinElmer — with a market capitalization of $20.97 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.

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.

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Per management, the company spent an incremental $25 million on people and digital capabilities while investing above $200 million in R&D to steadily/continuously develop a robust pipeline of new products across a full array of technologies.

COVID-related products and services contributed $365 million in the second quarter of 2021, 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. matched expectations leading to a revenue generation of around $155 million from its core COVID products in the said period.

With respect to COVID-related product launches and approvals, in April 2021, EUROIMMUN, a PerkinElmer company, introduced the SARS-CoV-2 NeutraLISA assay. It 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 the operating margin in the near term.

In the June quarter, adjusted gross profit 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’s level. Adjusted operating margin as a percentage of revenues was 33.5%, up 540 bps.

Factor Hurting the Stock

Growing exposure to the international markets increases the risk of adverse foreign exchange volatility for the company. The unfavorable fluctuations in currency exchange rates can affect PerkinElmer’s international sales.

Estimate Trend

PerkinElmer has been witnessing an upward estimate revision trend for 2021 so far. In the past 60 days, the Zacks Consensus Estimate for its earnings has moved 4.2% north 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 period’s 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%.


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