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Can Diagnostic Revenues Fuel PerkinElmer's (PKI) Q1 Earnings?

Zacks Equity Research

PerkinElmer, Inc. PKI is expected to release first-quarter 2019 results on Apr 25, after market close. The quarterly results are expected to reflect steady growth in the core Diagnostics business. Foreign exchange headwinds are also likely to show on results.

PerkinElmer has an average positive earnings surprise of 2.2% for the last four quarters.

Which Way Are Estimates Treading?

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share is pegged at 66 cents, suggesting a 4.8% improvement year over year. The same for revenues stands at $644.5 million, indicating growth of 0.1%.

Let’s see how things are shaping up before the earnings results.

PerkinElmer, Inc. Price and EPS Surprise


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

Diagnostics Revenues: A Key Catalyst

We expect PerkinElmer’s Diagnostics segment to be a major driver for first-quarter 2019 results. Notably, the company’s immunodiagnostics and applied genomics business lines are key contributors to Diagnostics revenues.

Per management, the acquisitions of Tulip, Bioo Scientific, RHS and EUROIMMUN have broadened the segment’s services. PerkinElmer is now providing services in reproductive health, emerging infectious diseases, autoimmune diseases and applied genomics which are expected to show on the quarter-to-be-reported results.

Additionally, the CE-IVD marking of the Vanadis product in the recent past is likely to widen accessibility to noninvasive prenatal screening for more women in the upcoming quarter.

Reflective of these, the Zacks Consensus Estimate for the segment’s first-quarter revenues stands at $258 million, indicating a rise of 4.5% year over year.

Other Factors at Play

Management at PerkinElmer is optimistic about product introductions in the areas of imaging, reagents and software, which might contribute to the results for the quarter to be reported. The company continues to expand its value-added services and IT offerings through the addition of new tools, solutions and capabilities. This expanded product portfolio is expected to aid results in the quarter to be reported.

Apart from acquisitions in the Diagnostics business, PerkinElmer is optimistic about the buyouts of Dani Analitica and China-based Spectrum Instruments. These acquisitions are expected to expand PerkinElmer’s footprint and technical capabilities in the core gas chromatography market. Additionally, PerkinElmer’s EUROIMMUN buyout has continued to be accretive and management foresees bigger opportunities ahead.

However, PerkinElmer expects a headwind of $1 million or less in the coming quarters from China. Tariffs in the Discovery & Analytical Solutions unit are likely to be at the high end since the company exports products from the United States to China.

In fact, the Zacks Consensus Estimate for the segment’s first-quarter revenues stands at $387 million, down 2.5% year over year.
Additionally, PerkinElmer expects foreign exchange to affect first-quarter 2019 results by approximately $27 million.

Despite the headwinds, PerkinElmer is well positioned on strength in Diagnostics business and acquisitions for the quarterly results.

What Does Our Model Say?

Per our proven model, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver a positive earnings surprise. This is precisely the case here.

Earnings ESP: PerkinElmer has an Earnings ESP of +2.64%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: PerkinElmer carries a Zacks Rank #3.

Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revision.

Other Stocks Worth a Look

Here are a few other medical stocks worth considering as they also have the right combination of elements to post an earnings beat this quarter.

Cardinal Health CAH has an Earnings ESP of +1.13% and a Zacks Rank #3.

Stryker Corporation SYK has an Earnings ESP of +0.63% and a Zacks Rank #3.

Medidata Solutions MDSO has an Earnings ESP of +12.31% and a Zacks Rank #3.

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