Back to top

Image: Bigstock

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

Read MoreHide Full Article

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 26.3% compared with the industry’s decline of 20.9% so far this year. The S&P 500 Index has fallen 10.8% in the same time frame.

Zacks Investment Research
Image Source: Zacks Investment Research

PerkinElmer — with a market capitalization of $19 billion — offers scientific instruments, consumables and services to pharmaceutical, biomedical, environmental testing, chemical and general industrial markets worldwide. Its earnings are anticipated to improve 46.5% over the next five years. The company pulled off a trailing four-quarter earnings surprise of 21.28%, 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.

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.

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. These two systems 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 gross 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.

On the second-quarter 2022 earnings call, the company demonstrated solid performance despite COVID-19-induced challenges. Its adjusted gross margin increased 110 basis points to 58.9%. The company’s operating margin was also strong at 32.7%. Despite being down year over year, revenues surpassed the Zacks Consensus Estimate by 2.5%. Revenues were up 8% organically after excluding sales of revenue growth from COVID products.

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. In the second quarter, foreign exchange was a 4% headwind to revenues. For the third quarter of 2022, the company projects a 4% headwind from foreign exchange and 3% for the full year of 2022.

Estimate Trend

PerkinElmer has been witnessing an upward estimate revision trend for 2022. In the past 30 days, the Zacks Consensus Estimate for its earnings has moved north by 3.8% to $7.61.

The Zacks Consensus Estimate for third-quarter 2022 revenues is pegged at $1.03 billion, suggesting a decline of 12.1% from the year-ago reported number.

Stocks to Consider

Some better-ranked stocks from the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , Patterson Companies, Inc. (PDCO - Free Report) and McKesson (MCK - Free Report) .

AMN Healthcare surpassed earnings estimates in each of the trailing four quarters, the average surprise being 15.66%. The company currently sports a Zacks Rank of 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 3.2%. AMN's earnings yield of 10.6% compares favorably with the industry's (2.2%).

Patterson Companies beat earnings estimates in all the trailing four quarters, the average surprise being 16.49%. The company currently carries a Zacks Rank #2.

Patterson Companies' long-term earnings growth rate is estimated at 7.9%. PDCO's earnings yield of 7.6% compares favorably with the industry's 3.9%.

McKesson surpassed earnings estimates in three of the trailing four quarters and missed once, the average surprise being 13%. The company currently carries a Zacks Rank #2.

McKesson’s long-term earnings growth rate is estimated at 9.9%. MCK’s earnings yield of 6.43% compares favorably with the industry's 3.9%.

Published in