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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, courtesy of a robust product portfolio and impressive margin expansion. However, forex remains a concern.

Shares of this currently Zacks Rank #3 (Hold) company have lost 8.5% compared with the industry’s decline of 12.9% over the past year. The S&P 500 Index has fallen 9.5% in the same time frame.

PerkinElmer — with a market capitalization of $17.83 billion — offers scientific instruments, consumables and services to pharmaceutical, biomedical, environmental testing, chemical and general industrial markets worldwide. It anticipates earnings to improve 46.5% over the next five years. The company pulled off a trailing four-quarter earnings surprise of 22.1%, on average.

Key Catalysts

PerkinElmer provides 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 on people and digital capabilities and invested more than $200 million in R&D to continuously develop a robust pipeline of products across a wide array of technologies.

In April 2022, PerkinElmer announced the expansion of its in vivo imaging portfolio with the introduction of the Vega imaging system. This system is a first-of-its-kind ultrasound platform that integrates hands-free, automated technology with a high-throughput ability to advance non-invasive research and drug development studies of cancer, liver and kidney disease, cardiology, and more. In the same month, the company launched two ready-to-use Homogenous Time Resolved Technology (HTRF) and AlphaLISA no-wash assay kits. These kits have been created to quickly and easily identify and quantify CHO host cell protein (HCP) impurities during biopharmaceutical manufacturing.

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In March, PerkinElmer launched its FT-IR liquid food testing platform, including instruments, software, and streamlined workflows. This includes the LQA300 TM FT-IR system for wine and the LactoScope 300TM FT-IR system for liquid dairy, which leverage PerkinElmer’s FT-IR Spectroscopy technology and expands the company’s FT-IR dairy portfolio, respectively. In the same month, the company unveiled V21 of its ChemDraw software featuring the capability to import, animate and share 3D chemical structures natively in the Microsoft PowerPoint application with one click. This, in turn, will help chemists to create more intelligent research reports quickly and easily, thereby enhancing information sharing and partnership, and supporting real-time decision making.

The company’s operating margin continues to improve on the back of productivity initiatives and volume leverage. The product introductions are anticipated to enhance the product mix, thus increasing the gross margin. This, coupled with stringent cost control, will continue to drive the operating margin in the near term.
Per the first-quarter 2022 earnings call, the company demonstrated solid performance despite COVID-19-induced challenges. Its adjusted operating margin remained strong at 32.5%.

Factor Hurting the Stock

Growing exposure to the international markets makes the company susceptible to the risk of adverse foreign exchange volatility. The unfavorable fluctuations in currency exchange rates can hurt PerkinElmer’s international sales. Per the first-quarter 2022 earnings call, foreign exchange was a 2% headwind to revenues. For the second quarter of 2022, the company has projected a 3% headwind from foreign exchange and 2% for the full year of 2022.

Estimate Trend

PerkinElmer has been witnessing an upward estimate revision trend for 2022. In the past 60 days, the Zacks Consensus Estimate for its earnings moved north by 6.1% to $7.34.

The Zacks Consensus Estimate for second-quarter 2022 revenues is pegged at $1.21 billion, suggesting a decline of 1.7% from the year-ago reported number.

Stocks to Consider

Some better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , Masimo Corporation (MASI - Free Report) and ShockWave Medical, Inc. (SWAV - Free Report) .

AMN Healthcare surpassed earnings estimates in each of the trailing four quarters, the average surprise being 15.6%. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AMN Healthcare’s long-term earnings growth rate is estimated at 1.1%. The company’s earnings yield of 11.4% compares favorably with the industry’s (0.8%).

Masimo beat earnings estimates in each of the trailing four quarters, the average surprise being 4.4%. The company currently carries a Zacks Rank #2 (Buy).

Masimo’s estimated earnings growth rate for second-quarter 2022 is pegged at 22.3%. The company’s earnings yield is 3.8% against the industry’s (8.5%).

ShockWave Medical surpassed earnings estimates in each of the trailing four quarters, the average surprise being 189.9%. The company currently flaunts a Zacks Rank #1.

ShockWave Medical’s earnings growth rate for 2022 is estimated at 807.7%. The company’s earnings yield of 0.9% compares favorably with the industry’s (8%).