PerkinElmer (PKI) reported fourth-quarter and fiscal 2010 adjusted (excluding one-time expenses) earnings per share of 44 cents and $1.33, beating the corresponding Zacks Consensus Estimate of 41 cents and $1.31, and surpassing the year-ago earnings per share of 37 cents and $1.07, respectively. The quarterly results surpassed the company’s previously issued guidance of 40-42 cents.
Net income (as reported) climbed roughly seven-fold year over year to $288.5 million (or $2.46 a share) in the reported quarter from only $39.9 million (or $0.34 a share) in the year-ago quarter riding on roughly $246 million in income from discontinued operations and dispositions (net of tax). PerkinElmer divested its Illumination and Detection Solutions segment in the fourth quarter.
Revenues from continuing operations came in at $470 million in the reported quarter, up 10% year over year (up 9% on an organic basis), exceeding the Zacks Consensus Estimate of $463 million. The corresponding figure for fiscal 2010 was $1,704 million, an increase of 10% (up 8% on an organic basis), also beating the Zacks Consensus Estimate of $1,713 million.
Segment-wise Revenue
Sales from the Human Health segment were $215.7 million, up 12% (up 10% on an organic basis) year over year. Revenues from the Environmental Health segment were $254.2 million, up 8% (up 9% on an organic basis).
Adjusted gross margin was 44.3% in the reported quarter, lower than 45.2% in the prior-year quarter. Adjusted operating margin was 15.8%, up 60 basis points on a year-over-year basis.
Adjusted operating margin at the Human Health segment was 19.1%, down a marginal 10 basis points year over year. Adjusted operating margin at the Environmental Health segment was 15.4%, flat with the year-ago quarter.
Balance Sheet
Cash and cash equivalents were $420 million, as of January 2, 2011, up 133.8% year over year. Long-term debt, excluding minor short-term borrowings, was $424 million, down 24%.
Outlook
The company forecast adjusted earnings per share for fiscal 2011 in a range of $1.56 to $1.64. Organic revenue is expected to increase in the mid single digits.
PerkinElmer has established itself as a market leader, particularly in the genetic screening segment, and holds one of top two market share positions in several important subsets of the life sciences technology and genetic screening businesses.
It, however, operates in a highly competitive industry characterized by rapid technological change and evolving industry standards. As a result, the company must make large investments in R&D in order to maintain a competitive pipeline. PerkinElmer competes with Thermo Fisher Scientific (TMO) among others.
The company continues to execute well across all its product lines aided by rebounding markets and cost containment efforts. Its transfer of select manufacturing to China has expanded operating margins. PerkinElmer has increased its productivity and improved product mix in favor of higher value added products. This has led to higher operating margins.
PerkinElmer’s exposure to poor end market visibility might result in an unattractive risk-reward trade-off for the stock. Our Neutral recommendation is supported by a short-term Zacks #3 Rank (Hold).
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