Pall Corp. Q3 Earnings Miss, Revs Beat - Analyst Blog

Pall Corporation PLL reported third-quarter fiscal 2014 (ended Apr 30, 2014) pro forma earnings of 81 cents a share, 2.4% below the Zacks Consensus Estimate of 83 cents. However, earnings were 9.5% above the prior-year quarter's earnings of 74 cents a share. The reported earnings per share EPS include a 1 cent negative impact of foreign currency translation.

Despite economic headwinds in some of Pall's industrial end markets, the company reported profits attributable primarily to improved operational execution and favorable impact of structural cost actions.

Revenues

Total revenue in the quarter increased 6.4% year over year to $682.4 million, primarily on the back of strong Life Sciences sales and an improvement in the Industrial business. Revenues were above the Zacks Consensus Estimate of $681 million. 

Segment Revenues

The Life Sciences segment revenues climbed 12% in local currency to $369 million in the reported quarter. The upside was driven by a 12% rise in Biopharmaceuticals sales on synergies from acquisitions, 8% growth in Food & Beverage attributable on strong performance in the Americas and Asia and 3% growth in Medical aided by higher OEM sales.

Revenues in the Industrial segment increased marginally by 1% year over year in local currency to $313 million. Revenues were impacted by lower sales in its Aerospace division which were down by almost 13% owing to difficult year-over-year comparisons from large aftermarket sales and helicopter program shipments in the third quarter of 2013, which did not feature in this quarter.

However, this decline was partially offset by an 18% increase in the Microelectronics division sales led by new business awards and strong performance across several regions. The company's Process Technologies business revenues remained flat with the prior-year quarter level, in local currency.

Margins        

Gross margin in the quarter contracted 110 basis points to 51.0% of sales. However, the operating margin increased to 17.6% in the quarter from 17.4% in the prior-year quarter.    

Cash Flow and Balance Sheet

Exiting the quarter, cash and cash equivalents totaled $870.9 million, down from $936.9 million at the end of Jul 31, 2013.

Year to date, net cash from operating activities was $342.2 million, up significantly by 65.4% from $206.9 million as on Apr 30, 2013. The increase primarily reflects benefits from the company's efficient working capital management in the quarter.

Capital expenditure for the 9-month period was $50.3 million, while the company paid $88.6 million in dividends.

Pall's free cash flow for the period stood at $291.9 million compared to $140.5 million on Apr 30, 2013.

Outlook

Pall reiterated its guidance for fiscal 2014. It expects pro forma EPS in the range of $3.35 to $3.45. Earlier, the company had projected fiscal 2014 EPS  growth in the band of 9 -15% over $3.04 EPS reported for fiscal 2013.

Zacks Rank

Pall has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry worth considering at the moment include Fuel Tech Inc. FTEK, Landauer Inc. LDR and Pure Cycle Corp. PCYO. All three carry a Zacks Rank #2 (Buy).

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