PKI Meets EPS in 4Q, Posts Loss

Zacks

PerkinElmer (PKI) reported fourth-quarter and 2012 adjusted (excluding one-time expenses) earnings per share of 65 cents and $2.06, respectively, meeting the corresponding Zacks Consensus Estimates and beating the year-ago earnings per share of 62 cents and $1.83, respectively.

Net loss from continuing operations was $16.2 million, or 14 cents per share, in the fourth quarter versus net loss of $83.2 million, or 74 cents per share, in the prior-year quarter. The results for the reported quarter include mark-to-market charges for pension plans and non cash charges related to trade name.  .

Revenues

Revenues from continuing operations stood at $572.9 million in the reported quarter, up 6.2% (organic growth of 3%) year over year, missing the Zacks Consensus Estimate of $580 million. The corresponding figure for fiscal 2012 was $2,115.2 million, an increase of 10.3% (organic growth of 5%), missing the Zacks Consensus Estimate of $2,143 million.

Segment-wise Revenue

Sales from the Human Health segment stood at $274.5 million, up 6.5% (up 3% on an organic basis) year over year.  Revenues from the Environmental Health segment amounted to $298.4 million, up 5.9% (up 3% on an organic basis).  

Margins

Adjusted gross margin was 48.8% in the fourth quarter, lower than 49.9% in the prior-year quarter. Adjusted operating margin was 18.3%, down 20 basis points on a year-over-year basis.  

Adjusted operating margin at the Human Health segment was 21.9%, down 100 basis points year over year. Adjusted operating margin at the Environmental Health segment was 18.5%, down 30 bps from the year-ago quarter.

Balance Sheet

Cash and cash equivalents amounted to $171.4 million as of December 30, 2012, up 20.4% year over year. Long-term debt, excluding minor short-term borrowings, was $938.8 million, marginally lower on a year-over-year basis.

Outlook

The company forecasts adjusted earnings per share for 2013 in the range of $2.24 to $2.32. Reported earnings per share from continuing operations are forecast in the range of $1.57 to $1.65. Organic revenue is expected to increase in the mid-single digits.

PerkinElmer has established itself as a market leader, particularly in the genetic screening segment, and holds one of top two market share positions in several important subsets of the life sciences technology and genetic screening businesses.

The company continues to execute well across several product lines aided by rebounding markets and cost containment efforts. PerkinElmer’s transfer of select manufacturing to China has expanded its operating margins. The company has increased its productivity and improved product mix in favor of higher value added products, resulting in higher operating margins.

PerkinElmer, however, operates in a highly competitive industry characterized by rapid technological change and evolving industry standards. As a result, the company must make large investments in R&D in order to retain a competitive pipeline. PerkinElmer competes with Thermo Fisher Scientific (TMO) among others.

PerkinElmer's exposure to poor end market visibility might result in a relatively unattractive risk-reward trade-off for the stock. However, the company’s operations, both sales and manufacturing, are diversified on a geographic basis. It has emerged as a higher-growth, higher-margin company vis-à-vis its peers.

The stock carries a Zacks Rank #2 (Buy) rating. Mettler-Toledo International Inc. (MTD) and Measurement Specialties Inc. (MEAS) carry Zacks Rank #2 (Buy) ratings. Both stocks are expected to do well.

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