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PerkinElmer (PKI) Up 5.9% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for PerkinElmer (PKI - Free Report) . Shares have added about 5.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is PerkinElmer due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

PerkinElmer Misses Q3 Earnings Estimates, Gains from EUROIMMUN

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

The company reported revenues of $674.3 million, which also 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%.

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.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, PerkinElmer has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, PerkinElmer has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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