PerkinElmer, Inc. PKI is well-poised for growth, backed by a robust product portfolio and impressive margin expansion. However, forex remains a concern.
Shares of this currently Zacks Rank #3 (Hold) company have gained 43.2% compared with the industry’s growth of 42.4% in the past year. The S&P 500 Index has rallied 32.3% in the same time frame.
PerkinElmer — with a market capitalization of $23.65 billion — offers scientific instruments, consumables and services to pharmaceutical, biomedical, environmental testing, chemical and general industrial markets worldwide. It anticipates earnings to improve 44.2% over the next five years. The company has a trailing four-quarter earnings surprise of 21.5%, on average.
PerkinElmer delivers a comprehensive suite of scientific informatics and software solutions to aggregate data into actionable insights in an automated and scalable way.
Per management, the company spent an incremental $25 million on people and digital capabilities and invested above $200 million in R&D to continuously develop a robust pipeline of new products across a full array of technologies.
COVID-related products and services contributed $300 million in the third quarter of 2021, primarily driven by the company’s core products and COVID-related lab services. Per management, both the company’s COVID and non-COVID revenue performance surpassed expectations with double-digit growth in both its Discovery & Analytical Solutions and Diagnostics segments.
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With respect to COVID-related product launches and approvals, in October 2021, EUROIMMUN, a PerkinElmer company, announced that it has received the FDA’s Emergency Use Authorization (EUA) for its Anti-SARS-CoV-2 S1 Curve ELISA (IgG). This assay enables the qualitative and semi-quantitative detection of IgG antibodies produced against the SARS-CoV-2 S1 antigen in human serum and plasma. In the same month, PerkinElmer announced that it has received EUA from the FDA for the PKamp Respiratory SARS-CoV-2-RT-PCR Panel 1 assay.
The company’s gross and operating margin continues to improve 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.
In the third quarter of 2021, adjusted gross profit amounted to $673.5 million, up 23.7% year over year. Adjusted gross margin, as a percentage of revenues was 57.7%, up 120 basis points (bps) year over year. Adjusted operating income was $358.9 million, which climbed 17.9% from the year-ago quarter. The company’s adjusted operating margin remained robust at 31%.
Factor Hurting the Stock
Growing exposure to the international markets increases the risk of adverse foreign exchange volatility for the company. The unfavorable fluctuations in currency exchange rates can affect PerkinElmer’s international sales.
PerkinElmer has been witnessing an upward estimate revision trend for 2021. In the past 60 days, the Zacks Consensus Estimate for its earnings moved north by 9.3% to $10.83.
The Zacks Consensus Estimate for fourth-quarter 2021 revenues is pegged at $1.22 billion, suggesting a decline of 10.3% from the year-ago reported number.
Stocks to Consider
Some better-ranked stocks in the broader medical space include Thermo Fisher Scientific Inc. TMO, McKesson Corporation MCK and AngioDynamics, Inc. ANGO.
Thermo Fisher surpassed earnings estimates in each of the trailing four quarters, the average surprise being 9.02%. The company currently carries a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Thermo Fisher’s long-term earnings growth rate is estimated at 14%. The company’s earnings yield of 3.7% compares favorably with the industry’s (3.6%).
McKesson surpassed earnings estimates in each of the trailing four quarters, the average surprise being 19.9%. The company currently carries a Zacks Rank #2 (Buy).
McKesson’s long-term earnings growth rate is estimated at 8.9%. The company’s earnings yield of 9.9% compares favorably with the industry’s 3.2%.
AngioDynamics surpassed earnings estimates in three of the trailing four quarters and missed once, the average surprise being 125.6%. The company currently carries a Zacks Rank #2.
AngioDynamics’ consensus mark for revenues for fiscal 2022 stands at $313.3 million, suggesting an improvement of 7.7% from the prior-year reported figure. The company’s earnings yield of 0.1% compares favorably with the industry’s (3.6%).
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