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Why Is PerkinElmer (PKI) Up 10.3% Since Last Earnings Report?

A month has gone by since the last earnings report for PerkinElmer (PKI). Shares have added about 10.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is PerkinElmer due for a pullback? 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 Q3 Earnings Top, Revenues Decline Y/Y

PerkinElmer reported third-quarter 2022 pro-forma adjusted earnings per share (EPS) of $1.51, which beat the Zacks Consensus Estimate of $1.48 per share by 2%. The bottom line, however, declined 34.6% from the year-ago quarter.

PerkinElmer signed an agreement to divest its Applied, Food and Enterprise Services (“AES”) businesses with an investment firm, New Mountain Capital, in August for up to $2.45 billion in total consideration. The deal is expected to close in the first quarter of 2023. The AES business is part of PKI’s Discovery & Analytical Solutions segment, which is currently held for sale and the company is reporting it as a discontinued operation. The company reported its third-quarter results with adjusted pro-forma figures for its total business, including AES. It also reported adjusted and GAAP figures separately for its continuing operations, which exclude the AES business.

Adjusted EPS from continuing operations was down 41.5% from the year-ago period to $1.21. Adjusted EPS from AES business was 30 cents, up 25% year over year.

GAAP EPS from continuing operations in the quarter was 55 cents compared with the year-ago quarter's figure of 94 cents.

Revenue Details

Based in Waltham, MA, this leading MedTech company reported pro-forma adjusted revenues of $1.03 billion, down 12% year over year and 13% organically. However, the metric was up 9% organically after excluding sales from COVID products. The top line was in line with the Zacks Consensus Estimate.

Revenues from continuing operations were down 17% year over year and 23% organically. However, revenues from continuing were up 8% organically after excluding sales of from COVID products.

Segment Details

Discover & Analytics Solutions

In this segment, pro-forma revenues were $633 million, reflecting a rise of 23.4% from the year-ago quarter. Organically, the segment witnessed an increase of 12%. Revenues from continuing operations were $313 million, up 50.5% year over year. Organically, the metric was up 14%.

Coming to profits at the DAS segment, the company reported third-quarter 2022 adjusted pro-forma operating income of $165 million, up 73.7% from the year-ago quarter. Adjusted operating income from continuing operations was $117 million, up 101.7% year over year.

Diagnostics segment

Revenues at this segment amounted to $399 million, down 39% on a year-over-year basis. Organically, segment revenues decreased 33% in the third quarter.

Adjusted operating income in the segment totaled $123 million, down 57.1% from the year-ago quarter.

Margin Analysis

Adjusted gross profit from continuing operations in the quarter amounted to $455.5 million, down 18.8% year over year. Adjusted gross margin, as a percentage of revenues, was 64%, down 110 basis points (bps) year over year.

Selling, general and administrative expenses were $240 million, down 13% on a year-over-year basis. Research and development expenses amounted to $53.5 million, up 8.3% from the year-ago quarter.

Adjusted operating income was $223.8 million, which declined 30.5% from the year-ago quarter. Adjusted operating margin, as a percentage of revenues, was 31.4%, down 600 bps. Pro forma adjusted operating income for the quarter was $272 million, down 24.2% year over year.

Financial Update

The company exited the third quarter with cash and cash equivalents of $400.7 million, compared with $360.8 million in the second quarter of 2022.

Net cash provided by operating activities, including discontinued operations, in the third quarter totaled $160 million compared with $313.8 million in the year-ago quarter.

2022 Guidance

PerkinElmer provided pro-forma and continuing operations revenues and pro-forma earnings guidance for fourth-quarter 2022 and full-year 2022.

For fourth-quarter 2022, the company projects pro-forma adjusted EPS in the range of $1.65 to $1.67. The Zacks Consensus Estimate is pegged at $1.67 per share. For the same period, revenues from continuing operations and pro-forma revenues are anticipated to be $0.73 billion and $1.06-$1.07 billion, respectively. The Zacks Consensus Estimate for the same stands at $1.1 billion.

For 2022, the company expects pro-forma adjusted EPS in the range of $7.89 to $7.91. The Zacks Consensus Estimate is pegged at $7.80 per share.

Revenues from continuing operations and pro-forma revenues are anticipated to be $3.3 billion and $4.59-$4.60 billion, respectively. The consensus mark stands at $4.62 billion.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

At this time, PerkinElmer has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, 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 D. 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.

Performance of an Industry Player

PerkinElmer belongs to the Zacks Instruments - Scientific industry. Another stock from the same industry, Waters (WAT), has gained 10.1% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.

Waters reported revenues of $708.56 million in the last reported quarter, representing a year-over-year change of +7.5%. EPS of $2.64 for the same period compares with $2.66 a year ago.

Waters is expected to post earnings of $3.74 per share for the current quarter, representing a year-over-year change of +1.9%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Waters. Also, the stock has a VGM Score of F.

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