Earnings Scorecard: PerkinElmer - Analyst Blog

Following the release of first quarter results on May 7, 2010, majority of the analysts covering PerkinElmer Inc. (PKI) have made upward revisions to their 2010 and 2011 annual estimates. The company performed impressively in the quarter, beating the Zacks Consensus Earnings Estimate by 2 cents and the year-ago earnings by 5 cents.

The wide range of products offered by the company, its strong international presence and the growth-by-acquisition strategy should continue to drive growth in the coming quarters.

Earnings Report Review

PerkinElmer Inc.’s fiscal first quarter 2010 (ended April 4, 2010) earnings of 31 cents per share (excluding special items) surpassed the Zacks Consensus Estimate of 29 cents and the year-ago earnings (excluding special items) of 26 cents. On a reported basis, the company earned 22 cents per share (from continuing operations) against 13 cents in the year-ago quarter.

Revenues in the reported quarter climbed 7% year over year to $465.1 million. Revenues were favorably impacted by foreign exchange and acquisitions to the tune of 4% and 1%, respectively.

(Read our full coverage on this earnings report here: PerkinElmer Tops; Raises Outlook)

Agreement of Estimate Revisions

All 7 analysts covering the stock for fiscal 2010 have raised their earnings estimates in the last 30 days. Fiscal 2011 estimates have also been revised upwards by 5 of the 8 analysts covering the stock, with no downward revisions in the last 30 days.

There are a number of reasons for the positive sentiment around PerkinElmer.

PerkinElmer’s significant international presence is encouraging and has boosted its product portfolio and client base. The company markets its products and services in more than 150 countries. Furthermore, by shifting some of its operations to Asia, the company should be able to reduce its cost of operations.

PerkinElmer, a leader in the area of newborn testing, enhanced its position further when in November 2009 it received 510K clearance from the U.S. Food and Drug Administration (FDA) for its Genetic Screening Processor (GSP) system, which is used by public health laboratories around the world as part of newborn screening programs.

The company has made many acquisitions in the past and is on the lookout for more. These acquisitions have helped PerkinElmer grow and expand its product offerings. For example, in the third quarter of 2009, the company acquired Sym-Bio LifeScience Co. Ltd, which strengthened its manufacturing capability in China, providing access to infectious disease diagnostic products.

The company strengthened its research division by acquiring GE’s radiochemical research portfolio, which is used in drug development. The impending acquisition of Signature Genomic Laboratories also aims at bolstering PerkinElmer’s position in cancer diagnostics.

Magnitude of Estimate Revisions

The table above indicates that earnings estimates have increased by 6 cents over the last 30 days for fiscal 2010 and by 4 cents in fiscal 2011. This further ballasts our belief in a bright outlook for the company.

Our Recommendation

Currently, we are Neutral on PerkinElmer. While we are pleased with the company’s strong international presence, which contributes most of its revenues, we remain concerned about the competition in the industry, characterized by rapid technological changes and evolving industry standards. Furthermore, even though the company relies on acquisitions to drive growth and has completed several acquisitions over the past few years which have contributed to growth, the strategy has inherent risks.

Our Neutral stance on the Waltham, Massachusetts based company indicates that the stock is expected to perform in line with the US equity market over the next six to twelve months. We advise investors to retain the stock over the time period.

About Earnings Estimate Scorecard

Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard" articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at http://www.zacks.com/education/

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