PerkinElmer (PKI) Q2 Earnings & Revenues Top, EPS View Up

Maintaining its streak of positive earnings surprises, PerkinElmer, Inc. PKI reported second-quarter 2018 adjusted earnings of 91 cents per share, beating the Zacks Consensus Estimate by 5.8%.

Based in Waltham, MA, the leading MedTech company reported adjusted revenues of approximately $703.4 million, which surpassed the Zacks Consensus Estimate of $693.8 million. Revenues also surpassed the year-ago quarter’s figure by 28.6%.

The stock carries a Zacks Rank #3 (Hold). PerkinElmer has outperformed its industry in a year’s time. The stock has returned 19.7%, higher than the industry's 8.2%.

Segment Details

Discovery & Analytical Solutions (DAS)

With robust growth in the life sciences business and applied end markets, revenues from DAS totaled $430.6 million in the second quarter, up 12.4% year over year. Organic revenues increased 10% year over year.

PerkinElmer, Inc. Price, Consensus and EPS Surprise

 

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

 

Within life sciences business, the company saw strong performance in the pharma biotech end market led by strength in the Drug Discovery segment. Further, driven by strong instrument sales, industrial, environmental and Asian food end markets led the impressive performance delivered by the applied end markets in the reported quarter.

Coming to profits at the DAS segment, the company reported second-quarter 2018 adjusted operating income of $76.4 million, up from $63.6 million in the year-ago quarter.

PerkinElmer registered double-digit organic revenue growth in Asia and Europe and high single-digit organic revenue growth in the Americas. In emerging markets, the company reported double-digit organic revenue growth on strength in China and India.

Diagnostics segment

Revenues were $272.7 million compared with $163.8 million a year ago, reflecting a 66.2% year-over-year increase. This reflects an improvement of 10% organically.

Within the Diagnostics business, PerkinElmer witnessed high single-digit organic revenue growth in reproductive health, and double-digit growth in genomics and immunodiagnostics. 

New launches like Tulip and EUROIMMUN saw a strong quarter. Furthermore, on a geographical basis, PerkinElmer saw organic revenue growth of low teens in Asian markets. In Europe, revenues increased double digits whereas in the Americas, the company saw high single-digit organic revenue growth.

Adjusted operating income in the segment totaled $77.2 million, compared with $48.1 million in the second quarter of 2017.

Margin Analysis

Adjusted gross profit in the quarter came in at $360.9 million, up 35.2% year over year. Adjusted gross margin, as a percentage of revenues, was 51.3% in the quarter, up 250 basis points (bps) year over year.

Adjusted operating income came in at $138.3 million, up 41.4% year over year. Adjusted operating margin, as a percentage of revenues, was 19.7% in the quarter, up 180 bps.

Guidance Updated

For 2018, PerkinElmer expects adjusted earnings of $3.65 per share, which is significantly higher than the previously issued guidance of $3.60. Notably, the Zacks Consensus Estimate for the same is currently pegged at $3.60, below the company’s estimate.   

The company projects revenues of $2.78 billion for 2018. This guidance includes EUROIMMUN sales of around $370 million and $30 million of gains from favorable currency movement. Notably, the company previously expected $2.8 billion of revenues in 2018. The Zacks Consensus Estimate for revenues is currently pegged at $2.80 billion, slightly above the company’s estimate.    

Despite an unfavorable foreign exchange environment, which had an adverse impact on financials in the quarter under review, the company expects strong adjusted operating margin improvement over the second half of 2018. Management continues to expect a 70-90 bp margin expansion in 2018.

In Conclusion

PerkinElmer exited the second quarter on a solid note on a strong segmental show. Growth in DAS was bolstered by strength in the life sciences, applied end markets, informatics profile and OneSource offering. Within Diagnostics, the company saw sturdy performances by latest launches like Tulip and EUROIMMUN. PerkinElmer experienced healthy growth across all major geographies — Asia, Americas, Europe and the BRIC nations. Solid prospects in the elemental-analysis product line hold promise as well. Furthermore, a positive guidance and a solid long-term outlook for 2020 boosts investors’ confidence.

On the flip side, despite having a diversified portfolio, unfavorable foreign exchange is a primary concern. Softness in the industrial end markets due to unfavorable timing of instrument orders has been a major dampener. Further, the company continues to acquire a large number of companies which increases integration risks. Also, high debt levels may hinder the company’s expansion plans.

Q2 Earnings of MedTech Majors at a Glance

A few better-ranked stocks in the broader medical space, which reported solid earnings this season, are Intuitive Surgical ISRG, Chemed Corporation CHE and Align Technology, Inc ALGN. While Intuitive Surgical sports a Zacks Rank #1 (Strong Buy), Chemed and Align Technology carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical reported second-quarter 2018 adjusted EPS of $2.76, which beat the Zacks Consensus Estimate of $2.48. Revenues totaled $909.3 million, also surpassing the consensus estimate of $870 million.

Align Technology posted second-quarter 2018 adjusted EPS of $1.30, steering past the Zacks Consensus Estimate of $1.09. Revenues came in at $490.3 million, beating the consensus estimate of $462.9 million.

Chemed reported second-quarter 2018 adjusted EPS of $2.81, which trumped the Zacks Consensus Estimate of $2.68. Revenues of $441.8 million edged past the Zacks Consensus Estimate of $432.3 million.

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