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PerkinElmer Q3 Earnings in Line, Revenues Beat Estimates

PerkinElmer IncPKI reported third-quarter 2015 earnings of 60 cents per share, which were in line with the Zacks Consensus Estimate. Earnings per share (EPS) increased 5.3% year over year driven by modest revenue growth. At constant currency (cc), EPS surged almost 15.8% on a year-over-year basis.

Perkinelmer Inc. (PKI) - Earnings Surprise | FindTheCompany

Revenues increased 3.9% to $563.4 million and beat the Zacks Consensus Estimate of $555 million. The year-over-year upside was primarily backed by robust performance at its Human Health and Environmental Health segments. At constant currency (cc), revenues increased 10% on a year-over-year basis.

Adjusted gross margin declined 10 basis points (bps) to 47.2% in the quarter, due to higher cost of revenue.

Adjusted operating margin expanded 20 bps to 17%, driven by a 10 bps decline in selling, general & administrative (SG&A) as well as research & development (R&D) expenses.

Segment Details

Organic revenue growth stood at 6%. Organic revenue growth was in the mid single digits in the Americas and Asia and high single digit in Europe. In China, the company witnessed stable demand.

Adjusted revenues from the Human Health segment increased 1.8% year over year to $343.8 million, while Environmental health revenues improved 7.2% year over year to $219.8 million in the quarter. Environmental Health organic revenues increased 7% in the quarter, while Human Health climbed 5%.

On an organic basis, diagnostics business increased high-single digits driven by robust demand for newborn screening franchise. This was partially offset by flat organic revenue in medical imaging.

PerkinElmer's diagnostic business continues to grow in countries like China. Meanwhile, the nation recently called off the one child policy, and management expects this to have a positive impact on its diagnostics offerings over the next several years.

Organic revenue at the company's life science solutions business grew high single digits in the third quarter, primarily driven by higher instrument sales. Meanwhile, robust performance by the OneSource services business has been a key catalyst for the company in recent times.

The Human Health segment's operating margin expanded 110 bps, while Environmental Health margin declined 30 bps on a year-over-year basis in the quarter under review.

Product/Clinical/Partnership Updates

During the third quarter, PerkinElmer expanded its strategic relationship with the Monash Institute of Pharmaceutical Science in Victoria, Australia.

In the third quarter, PerkinElmer rolled out Opal tissue staining kits, part of the new Phenoptics workflow offering. During the quarter, the company launched Signals for Translational - a cloud-based informatics platform for pharmaceutical researchers that aggregates, manages and analyzes experimental and clinical data from various sources. Additionally, the company introduced the TGA 8000 analyzer for advance materials characterization.

Outlook

Fourth-quarter 2015 revenues are expected in the range of $610-$620 million, reflecting approximately 7% revenue growth at cc.

Organic revenue growth is projected in the band of 3%-4%. Adjusted EPS is expected in the range of $0.86-$0.89, which represents approximately 9% growth at the midpoint, at cc.

For full-year 2015, PerkinElmer narrowed the adjusted EPS guidance range to $2.56-$2.59, from the previous range of $2.55-$2.60. The midpoint has been maintained at $2.57, representing 13% growth at cc.

The company's optimism is largely reflected by its full-year outlook of high single digit organic revenue growth in China.

Our Take

PerkinElmer continues to execute its business strongly across several product lines aided by rebounding markets and effective cost-containment efforts. With an enhanced focus on product innovation and improving end-market trends, PerkinElmer has considerable potential upside. New product launches are expected to be key growth catalysts, going forward.

However, owing to the strengthening of the U.S. dollar, sluggish European macro-environment, challenges in Japan are expected to impede top-line growth in the near term.

Zacks Rank & Stocks to Consider

Currently, PerkinElmer carries a Zacks Rank #3 (Hold). Better-ranked stocks in the medical sector are EDAP TMS SA EDAP , Natus Medical BABY and Cesca Therapeutics KOOL . All the stocks sport a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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