Here's Why You Should Retain PerkinElmer (PKI) Stock Now
PerkinElmer, Inc. PKI is well poised for growth, courtesy of a robust product portfolio and impressive margin expansion. However, forex remains concerning.
Shares of this Zacks Rank #3 (Hold) company have gained 3.7% compared with the industry’s 20.7% growth in the past six months. The S&P 500 Index has fallen 7.4% in the same time frame.
PerkinElmer, with a market capitalization of $15.81 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 8.65%, on average.
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Key Catalysts
PKI provides a comprehensive suite of scientific informatics and software solutions to aggregate data into actionable insights in an automated and scalable way.
In November, PerkinElmer launched ready-to-use Adeno-associated Virus Vectors (AAV) Detection Kits to aid researchers working on gene therapies for various serious diseases. The validated and fully-automatable assays are built on PerkinElmer's proprietary AlphaLISA technology.
The launch will likely expand the company's cell and gene therapy portfolio, which includes gene editing and modulation, cell counting, antibody and flow cytometry innovations. This will enable PKI to significantly strengthen its Life Sciences business unit in the broader Discovery & Analytical Solutions segment.
PerkinElmer received the FDA’s marketing authorization for the assay kit for in vitro diagnostic (IVD) use by certified laboratories for the simultaneous detection of spinal muscular atrophy (SMA) and severe combined immunodeficiency (SCID) in newborns — EONIS SCID-SMA. In September, the company’s Oxford Immunotec announced that the FDA approved the use of the T-Cell Select reagent kit to automate its T-SPOT.TB test workflow for IVD use by certified laboratories.
The latest regulatory clearances are likely to aid PerkinElmer in significantly solidifying its foothold in the global IVD space and boosting its Diagnostics business.
The company launched a unique benchtop platform, Cellaca PLX Image Cytometry System, in September. The system is expected to enable researchers to evaluate multiple Critical Quality Attributes of cell samples in a single automated workflow, including cell identity, quality and quantity.
PerkinElmer’s gross margin has been improving on the back of productivity initiatives and volume leverage. The product introductions are anticipated to enhance the product mix, thereby increasing the gross margin. This, coupled with stringent cost control, will continue to drive the operating margin in the near term.
On the company’s fourth-quarter 2022 earnings call, it demonstrated a solid performance despite ongoing macro headwinds like inflationary pressure. Combined revenues, which include sales from held-for-sale business — Applied, Food and Enterprise Services — were up 8% organically after the exclusion of revenue growth sales from COVID-19 products. Revenues from continuing operations were down 27.9% year over year and 23% organically, primarily due to significantly lower sales of COVID products.
Factors 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 fourth quarter, the foreign exchange created a 5% headwind to revenues.
Its adjusted gross margin decreased 110 basis points to 64% during the third quarter. The company’s adjusted operating margin was also down 600 basis points to 31.4%.
Estimate Trend
PerkinElmer has been witnessing a downward estimate revision trend for 2023. In the past 60 days, the Zacks Consensus Estimate for its earnings has moved 4% south to $5.91.
The Zacks Consensus Estimate for first-quarter 2023 revenues is pegged at $997 million, indicating a 20.8% decline from the year-ago quarter.
PerkinElmer, Inc. Price
PerkinElmer, Inc. price | PerkinElmer, Inc. Quote
Stocks to Consider
Some better-ranked stocks in the broader medical space are Becton, Dickinson and Company BDX, Henry Schein HSIC and The Cooper Companies COO.
Becton, Dickinson and Company, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth of 7.8%. BDX’s earnings surpassed estimates in all the trailing four quarters, the average beat being 6.47%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company’s shares have gained 3.1% compared with the industry’s 12.2% growth in the past six months.
Henry Schein, carrying a Zacks Rank #2 at present, has an estimated long-term growth of 8.1%. Its earnings surpassed estimates in three of the trailing four quarters and met the same once, the average beat being 2.97%.
The company’s shares have gained 17.3% compared with the industry’s 12.2% growth in the past six months.
The Cooper Companies, carrying a Zacks Rank #2 at present, has an estimated long-term growth of 11%. The company’s earnings missed estimates in all the trailing four quarters, the average negative surprise being 1.82%.
Shares of COO have gained 28% compared with the industry’s 12.2% growth in the past six months.
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