PerkinElmer (PKI) Up 5.8% Since Earnings Report: Can It Continue?

It has been about a month since the last earnings report for PerkinElmer, Inc. PKI. Shares have added about 5.8% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? 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 Tops Q1 Earnings Estimates, FY17 View Up

Waltham, MA-based PerkinElmer Inc, a worldwide provider of products, services and solutions to the diagnostics, research, and laboratory service markets, reported first-quarter 2017 adjusted earnings of $0.55 per share, marginally beating the Zacks Consensus Estimate by $0.01.

Notably, adjusted earnings surpassed management’s guided range of $0.52 to $0.54.

The company reported adjusted revenues of $514.3 million, which comfortably beat the Zacks Consensus Estimate of $506 million. Interestingly, revenues were above management’s guided range of $500 million to $510 million.

Segment Details

Discovery & Analytical Solutions (DAS): Revenues totaled $361.8 million in the first quarter, compared with $356.4 million in the year-ago quarter. This marked a 2% rise organically.

Meanwhile, operating profit margin (as a percentage of revenues) in the first quarter was 14.1%, a little below the prior-year quarter’s level of 15.1%.

Diagnostics Segment: In this segment, revenues were $152.4 million in the first quarter, as compared with $151.7 million in the year-ago quarter. This implies an 8% increase organically.

Meanwhile, operating profit margin (as a percentage of revenues) for the segment in the first quarter was 29.8%, up from 28.2% in the year-ago quarter.

Q1 Highlights

At the Diagnostics business, PerkinElmer launched two products to facilitate targeted sequencing and detection of genetic variance to support oncology and genomics research.

In the infectious disease testing space, PerkinElmer closed the acquisition of Tulip Diagnostics in India at the beginning of the year. Per management, the integration is well on track.

In the first quarter, PerkinElmer expanded its pipeline with the introduction of products like the NexION 2000 ICP-MS and Vectra Polaris. The company experienced strong demand for several products like the QSight Triple Quad Mass Spec and the Operetta CLS which were introduced in the back half of 2016.

The company exclusively leveraged on its DAS service business in the quarter. Notably, the segment is approaching the $600 million mark in full-year 2017, thanks to a strong foothold in the biotech space.

Margin Details

Adjusted gross margin, as a percentage of revenues, was 48.4% in the quarter, down 50 basis points (bps) year over year. The downside was a result of an impact of acquisitions and divestitures completed in full-year 2016.

Adjusted selling, general & administrative (SG&A) expenses, as a percentage of revenues, were 25.6%, down 100 bps from the year-ago quarter.

Research and Development (R&D) expenses, as a percentage of revenues, rose 50 bps in the quarter to $33.3 million.

As a result, the company’s overall adjusted operating margin from continuing operations came in at 16.3% of net revenues and remained flat on a year-over-year basis.

Financial Details

For the first quarter, PerkinElmer’s operating cash flow from continuing operations was $41.2 million, as compared with $26.3 million in the prior-year quarter. The company finished the quarter with approximately $1.1 billion in debt.

Guidance Raised

The company raised its adjusted earnings and reported revenue guidance for full-year 2017.

PerkinElmer expects adjusted earnings per share in the band of $2.80 and $2.90, up from the previously provided range of $2.75 to $2.85.

Revenues are expected in the band of $2.2 billion to $2.22 billion, up from the previous $2.19 billion to $2.2 billion. This represents organic revenue growth of 4% and includes $25 million to $30 million in foreign exchange (FX) headwinds.

For the second quarter of 2017, PerkinElmer projects revenues in the range of $550 million to $555 million, which represents organic revenue growth of approximately 3% to 4%. Notably, this includes a 2% forex headwind.

Second-quarter adjusted earnings per share are forecasted in the range of $0.66 to $0.68.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.

PerkinElmer, Inc. Price and Consensus

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

VGM Scores

At this time, PerkinElmer's stock has a subpar Growth Score of 'D', however its Momentum is doing a lot better with a 'B'. However, the stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% 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.

The company's stock is suitable solely for momentum based on our styles scores.

Outlook

The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.

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