Balanced View of PerkinElmer - Analyst Blog

On May 14, we updated our research report on PerkinElmer, Inc. PKI. We believe the company is poised for growth given its reorganization and diversification measures. However, strong competitive pressure makes us uncomfortable about the company.

PKI posted adjusted earnings per share of 46 cents in the first quarter of 2014, surpassing the Zacks Consensus Estimate by 3 cents as well as the year-ago level of 36 cents by 27.8%. On a reported basis, PKI posted earnings per share of 30 cents for the quarter, edging past the year-ago reported earnings of 28 cents by 7.1%.

Revenues in the quarter went up 5.2% to $531.9 million and were almost in line with the Zacks Consensus Estimate of $531.0 million. Including purchase accounting adjustments, total revenues increased 5.1% to $533.4 million in the quarter.

Adjusted gross profit rose 4.1% to $249.6 million from $239.8 million in the prior-year quarter. However, adjusted gross margin declined 50 basis points (bps) to 46.8% in the quarter.

Gross margin was negatively impacted by higher service revenue mix, initial OneSource startup costs related to a number of new contracts and foreign exchange headwinds in the quarter. PKI anticipates moderate improvement in adjusted gross margins for 2014 as it launches new products and revenue mix returns to a more normalized rate.

For the second quarter of 2014, PKI expects adjusted earnings per share in the range of 57 to 59 cents, which represents growth of 12 to 16% from the prior-year quarter. The current Zacks Consensus Estimate of 59 cents is the upper-end of the guided range.

Revenues are expected in the range of $565 to $575 million for the quarter. The current Zacks Consensus Estimate of $572 million lies within the guided range.

For 2014, PKI expects reported earnings per share in the range of $1.91 to $1.95. On an adjusted basis, PKI raised its forecast for earnings per share to the range of $2.42 to $2.46 from $2.40 to $2.45. The current Zacks Consensus Estimate of $2.45 lies within the guided range.

Currently, PKI retains a Zacks Rank #2 (Buy). Some medical instrument companies that are worth considering at the moment include Accuray Incorporated ARAY, Masimo Corporation MASI, and Natus Medical Inc. BABY. All of them carry a Zacks Rank #2.