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 33% compared with the industry’s decline of 27.6% so far this year. The S&P 500 Index has fallen 18.2% in the same time frame.

PerkinElmer — with a market capitalization of $16.75 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.

Zacks Investment Research
Image Source: Zacks Investment Research

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 for the advancement of non-invasive research and drug development studies of cancer, liver and kidney disease, cardiology, and more. The company launched two ready-to-use Homogenous Time Resolved Technology (HTRF) and AlphaLISA no-wash assay kits in the same month. These kits have been created to quickly and easily identify as well as 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 expand the company’s FT-IR dairy portfolio. 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, as well as 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-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 the exclusion of revenue growth sales from COVID products.

Factor Hurting the Stock

Growing exposure to the international markets makes the company susceptible to 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.

Estimates Trend

PerkinElmer has been witnessing an upward estimate revision trend for 2022. In the past 60 days, the Zacks Consensus Estimate for its earnings has moved north by 6.2% to $7.83.

The Zacks Consensus Estimate for third-quarter 2022 revenues is pegged at $1.02 billion, suggesting a decline of 12.2% from the year-ago reported number.

Stocks to Consider

Some better-ranked stocks in the broader medical space  are ShockWave Medical (SWAV - Free Report) , AMN Healthcare Services (AMN - Free Report) and McKesson (MCK - Free Report) . While ShockWave Medical and AMN Healthcare Services sport a Zacks Rank #1 (Strong Buy), Alkermes carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

ShockWave Medical’s earnings per share estimates have improved from $2.02 to $2.57 for 2022 and from $2.95 to $3.42 for 2023 in the past 60 days. SWAV has gained 63.4% so far this year.

ShockWave Medical delivered an earnings surprise of 180.14%, on average, in the last four quarters.

Estimates for AMN Healthcare Services have improved from earnings of $10.41 to $11.26 for 2022 and $7.94 to $8.30 for 2023 in the past 60 days. AMN stock has declined 12.8% so far this year.

AMN Healthcare Services delivered an earnings surprise of 15.66%, on average, in the last four quarters.

McKesson’s earnings per share estimates have improved from $23.26 to $24.25 for fiscal 2023 and $25.41 to $26.04 for fiscal 2024 in the past 60 days. MCK has gained 37.4% so far this year.

McKesson delivered an earnings surprise of 13.00%, on average, in the last four quarters.

Published in