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PerkinElmer (PKI) Down 12.1% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

It has been about a month since the last earnings report for PerkinElmer (PKI). Shares have lost about 12.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is PerkinElmer due for a breakout? 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 Q4 Earnings and Revenues Beat Estimates

PerkinElmer, Inc. reported fourth-quarter 2019 adjusted earnings per share of $1.35, which beat the Zacks Consensus Estimate of $1.32 per share by 2.3%. Further, the bottom line improved 14.4% from the year-ago quarter.

Based in Waltham, MA, this leading MedTech company reported revenues of $805.5 million, up 6.5% from the year-ago quarter and improved 5% organically. Adjusted revenues in the reported quarter came in at $805.7 million, up 6.5% year over year. The top line also outpaced the Zacks Consensus Estimate by 0.4%.

2019 at a Glance

In 2019, the company reported revenues worth $2.88 billion, which met the Zacks Consensus Estimate. On a year-over-year basis, the top line improved 3.6%.

Adjusted EPS for the year was $4.10, which beat the Zacks Consensus Estimate by 0.5%. EPS also climbed 13.6% year over year.

PerkinElmer reports through two major segments — Discovery & Analytical Solutions (DAS) and Diagnostics.

In 2019, DAS revenues totaled $1.75 billion (61% of net revenues) and Diagnostics’ revenues came in at $1.14 billion (39%).

Segment Details

DAS

At this segment, revenues totaled $496.5 million, reflecting an improvement of 7.9% from the year-ago quarter. Organically, the segment grew 5% in the quarter under review. Per management, continued strength in life sciences and a rebound in the core food business contributed to organic revenues.

Coming to profits at the DAS segment, the company reported fourth-quarter 2019 adjusted operating income of $116 million, up 25.1% from the year-ago quarter.

Diagnostics segment

Revenues at this segment amounted to $309 million, up 4.2% on a year-over-year basis. Adjusted revenues in the segment totaled $309.2 million, up 4.2% from the prior-year quarter. Organically, the segment improved 5% in the fourth quarter. Per management, the upside can be attributed to strength across reproductive health and immunodiagnostics business lines.

Adjusted operating income in the segment totaled $90.6 million, up 5.6% from the year-ago quarter.

Geographical Details

Per management, the major geographies witnessed a mixed fourth quarter, with low-single digit organic revenue growth in the United States and mid-single digit organic revenue growth in Asia Pacific (APAC) and Europe.

Margin Analysis

Gross profit in the quarter came in at $398.2 million, up 5.8% year over year. Adjusted gross margin, as a percentage of revenues was 52.4%, up 100 bps year over year.

Adjusted operating income was $192.3 million, up 17% year over year.
Adjusted operating margin, as a percentage of revenues was 23.9%, up 220 bps.

Financial Update

In the fourth quarter, cash and cash equivalents came in at $191.9 million, increasing 17.6% from the prior-year quarter.

During the reported quarter, net cash provided by operating activities came in at $215.2 million, up 34.9% from the year-ago quarter.

2020 Guidance

PerkinElmer estimates adjusted earnings per share between $4.50 and $4.60. Moreover, revenues are anticipated to be in the range of $3.05-$3.09 billion.

For the first-quarter 2020, the company anticipates adjusted earnings per share of 70 cents. Revenues are expected to total $700 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -17.61% due to these changes.

VGM Scores

Currently, PerkinElmer has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. 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 this revision 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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