Wedbush Downgrades PerkinElmer Amid Growing FX, Ex-US Complexities

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  • Shares of PerkinElmer, Inc. PKI are up 20 percent year-to-date and hovering close to their 52-week high of $54.45.
  • Wedbush’s Zarak Khurshid downgraded the rating on the company from Outperform to Neutral, while maintaining a price target of $56.
  • The company’s 12-month risk reward profile is less attractive given the recent strong share price performance, Khurshid said.

PerkinElmer’s shares have jumped nearly 16 percent over the last two months, versus a near 7 percent gain in the BTK and S&P 500 indices over the same timeframe. Analyst Zarak Khurshid believes the recent outperformance was partly due to “rotation out of pure-play diagnostics and small cap stocks into large diversified businesses.”

Although PerkinElmer’s 3-5 percent 2016 organic growth story remains intact, greater uncertainties around medical imaging and forex and ongoing Russian and Japanese challenges make the high-end of the range difficult to reach, Khurshid said.

He added, “As a reminder, for every ~500 BPs of Fx headwind, PKI experiences roughly 50 BPs of GM and EBIT impact.”

Khurshid believes that PerkinElmer’s management quality and opex discipline remain among the best in the business. “We continue to believe there is good opportunity for meaningful long-term EPS leverage from indirect spending, new lean/Kizen manufacturing and supply chain rationalizations.”

The EPS estimates for 2015 and 2016 have been reduced from $2.59 to $2.56 and from $2.87 to $2.84, respectively, to reflect higher forex headwinds and poor global visibility.

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Posted In: Analyst ColorDowngradesAnalyst RatingsWedbushZarak Khurshid
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