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Why Is PerkinElmer (PKI) Down 8.4% Since Last Earnings Report?

Zacks Equity Research

It has been about a month since the last earnings report for PerkinElmer (PKI). Shares have lost about 8.4% 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 its most recent earnings report in order to get a better handle on the important catalysts.

PerkinElmer Q2 Earnings and Revenues Miss Estimates

PerkinElmer reported second-quarter 2019 adjusted earnings per share (EPS) of $1, which missed the Zacks Consensus Estimate of $1.01 per share by 0.9%. However, the bottom line improved 9.9% from the year-ago quarter.

Based in Waltham, MA, this leading MedTech company reported revenues of $722.5 million, up 2.7% from the year-ago quarter and improved 5% organically. Adjusted revenues in the quarter came in at $722.7 million, up 2.7% year over year. However, the top line lagged the Zacks Consensus Estimate of $$730.3 million by 1.1%.

Segment Details

DAS

At this segment, revenues totaled $434 million, reflecting an improvement of 0.8% from the year-ago quarter. Organically, the segment grew 2% in the quarter under review. Per management, the second-quarter performance was affected by soft performance in applied markets. However, solid show by life sciences contributed to organic revenue growth.

Coming to profits at the DAS segment, the company reported second-quarter 2019 adjusted operating income of $81.5 million, up 6.7% from the year-ago quarter.

Diagnostics segment

Revenues at this segment amounted to $288.6 million, up 5.8% on a year-over-year basis. Adjusted revenues in the segment totaled $288.7 million, up 5.8% from the prior-year quarter. Organically, the segment grew 9% in the second quarter. Per management, the upside can be attributed to strength across reproductive health, and immunodiagnostics business lines.

Adjusted operating income in the segment totaled $79.7 million, up 3.2% from the year-ago quarter.

Geographical Details

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

Margin Analysis

Gross profit in the quarter came in at $347.8 million, up 2.2% year over year. Adjusted gross margin, as a percentage of revenues, was 51%, down 30 bps year over year.

Adjusted operating margin was $146 million, up 5.6% year over year. Adjusted operating margin, as a percentage of revenues, was 20.2% in the quarter, up 50 bps.

Financial Update

In the second quarter, cash and cash equivalents came in at $150 million, down 8% from that of 2018-end level.

During the reported quarter, net cash provided by operating activities stood at $46.9 million, down 35.8% from the year-ago quarter.

2019 Guidance Reiterated

PerkinElmer continues to expect 2019 adjusted EPS in the range of $4.02-$4.07. Notably, the Zacks Consensus Estimate of $4.05 lies within the guided range.

How Have Estimates Been Moving Since Then?

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

VGM Scores

Currently, PerkinElmer has an average Growth Score of C, a grade with the same score on the momentum front. 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 C. 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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