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PerkinElmer (PKI) Misses on Q3 Earnings, Slashes EPS View

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PerkinElmer, Inc. (PKI - Free Report) reported third-quarter 2018 adjusted earnings per share (EPS) of 90 cents, missing the Zacks Consensus Estimate by 2.2%. However, EPS rose 23.3% from the year-ago quarter.

Based in Waltham, MA, the leading MedTech company reported revenues of $674.3 million, which missed the Zacks Consensus Estimate by 0.02%. Revenues grew 21.7% on a year-over-year basis.

Adjusted revenues came in at $674.5 million, which saw a year-over-year rise of 21.6%.

PerkinElmer, Inc. Price, Consensus and EPS Surprise

 

PerkinElmer, Inc. Price, Consensus and EPS Surprise | PerkinElmer, Inc. Quote

The Zacks Rank #3 (Hold) stock has outperformed its industry in a year’s time. The stock has returned 19.7% against the industry's 9.3% decline. The current level is also higher than the S&P 500 index’s 5.3% rally.

Segment Details

Discovery & Analytical Solutions (DAS)

Revenues in the segment totaled $406.2 million, reflecting a 5.4% rise from the year-ago quarter. Per management, the segment saw organic growth of 7% in the reported quarter.

The growth reflects strength in both life sciences and applied end markets. Life sciences strength was driven by continued performance in the pharma biotech end market. Notably, PerkinElmer’s new in vivo imaging products launched in late 2017 has been a key driver of DAS.

Coming to profits at the DAS segment, the company reported third-quarter 2018 adjusted operating income of $68 million, up from 10.1% from the year-ago quarter.

Diagnostics segment

Revenues were $268.1 million, up a whopping 58.8% on a year-over-year basis. Adjusted revenues in the segment totaled $268.3 million, up 58.7% from the prior-year quarter. On an organic basis, revenues shot up 8%.

Per management, growth was mainly driven by the company’s immunodiagnostics and applied genomics business lines. Acquisitions of Tulip and Haoyuan have also been key driving factors.

Adjusted operating income in the segment totaled $76.2 million, up 36% from the third quarter of 2017.

Geographical Details

In the quarter under review, PerkinElmer’s revenues saw healthy growth in all geographies with double-digit organic revenue growth in Asia, high single-digit organic revenue growth in the United States and low single-digit organic revenue growth in Europe.

In Asia, the company saw strong organic growth in China and India. For EUROIMMUN, high incidence rates and incremental global customer wins helped China as well as Germany experience organic revenue growth of low double digits.

Margin Analysis

Adjusted gross profit in the quarter came in at $344.1 million, up 24.5% year over year. Adjusted gross margin, as a percentage of revenues, was 51% in the quarter, up 120 basis points (bps) year over year.

Adjusted operating income came in at $128.6 million, up 22.2% year over year. Adjusted operating margin, as a percentage of revenues, was 19.1% in the quarter, up 10 bps.

Guidance

For 2018, PekinElmer expects adjusted EPS at $3.60, down from the previously guided figure of $3.65. Notably, the Zacks Consensus Estimate is pegged at $3.65, above the projected figure.

However, management expects core organic revenue growth of 6.5%. This includes EUROIMMUN sales of approximately $364 million. The Zacks Consensus Estimate stands at $2.78 billion.

Notably, management continues to expect approximately 15% organic revenue growth from EUROIMMUN in 2018.

For the fourth quarter of 2018, management forecasts reported revenues of $745 million, representing 16% year-over-year growth. The Zacks Consensus Estimate is pegged at $759.3 million, above the guided figure.

The guidance assumes approximately 5% core organic revenue growth, $102 million in sales from EUROIMMUN.

EPS in the fourth quarter is predicted at $1.16 for the fourth quarter, which represents a 20% year-over-year rise. The Zacks Consensus Estimate is pinned at $1.19, above the projected figure.

This forecast includes an additional 4-cent headwind from foreign exchange.

Summing Up

PerkinElmer exited the third quarter of 2018 on a dull note, with EPS and revenues missing the consensus mark. However, the company saw strong performances by its core DAS and Diagnostics segments. The growth came from strength in life sciences markets, immunodiagnostics and applied genomics business lines. Solid international growth buoys optimism in the stock. The company continues to gain from its EUROIMMUN acquisition, from which it expects notable contributions in the remainder of the year. Strong outlook for revenues is another positive. Considerable expansion in the company’s gross and operating margins is heartening as well.

On the flip side, PerkinElmer slashed its full-year EPS guidance. Notably, the company expects incremental foreign exchange headwinds to impact results in the rest of 2018. Furthermore, the company continues to acquire a large number of companies which increases integration risks.

Q3 Earnings of MedTech Majors at a Glance

A few top-ranked stocks in the broader medical space which reported solid earnings this season are Intuitive Surgical (ISRG - Free Report) , Stryker Corporation (SYK - Free Report) and Merit Medical Systems, Inc. (MMSI - Free Report) . Each of the stocks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Intuitive Surgical reported third-quarter 2018 adjusted EPS of $2.83, which beat the Zacks Consensus Estimate of $2.65. Revenues totaled $920.9 million, also surpassing the consensus estimate of $918.6 million.

Stryker posted third-quarter 2018 adjusted EPS of $1.69, steering past the Zacks Consensus Estimate of $1.68. Operating margin was 17.8%, up 30 bps.

Merit Medical reported third-quarter 2018 adjusted EPS of 47 cents, which trumped the Zacks Consensus Estimate of 42 cents. Revenues of $221.6 million edged past the consensus estimate of $218 million.

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