PerkinElmer Stays at Neutral - Analyst Blog

We maintain our Neutral recommendation on PerkinElmer (PKI), a leading provider of scientific instruments, consumables and services to pharmaceutical, biomedical, environmental testing, chemical and general industrial markets worldwide. Second–quarter fiscal 2010 earnings beat the Zacks Consensus Estimate and also exceeded the company’s forecast.

 

Healthy contributions from the Human Health and Environment Health segments fueled double-digit growth in revenues, which also surpassed the Zacks Consensus Estimate. Based on the encouraging results, PerkinElmer raised its earnings forecast for fiscal 2010.

 
PerkinElmer has established itself as the market leader in the genetic screening segment and holds major shares in several key subsets of the life sciences technology and genetic screening markets. The company’s significant international presence provides a diversified revenue stream and client base.

 

PerkinElmer continues to execute well across its entire product lines aided by rebounding markets and cost containment efforts. Moreover, the company continues to pursue an aggressive acquisition strategy, which is helping it grow and expand its product offerings.

 

As part of this initiative, PerkinElmer is acquiring the diagnostic genetic testing company Signature Genomic Laboratories. The acquisition will strengthen the company’s genetic testing service business and expand its foothold in the molecular diagnostics market.

 

However, PerkinElmer operates in a highly competitive industry characterized by rapid technological change and evolving industry standards. Moreover, the company’s “growth-by-acquisition” strategy has inherent integration and other risks.

 
We also remain concerned about the company’s heavy exposure to non-health care end-markets (represents roughly 40% of sales), such as imaging and industrial, which tend to be more cyclical in nature.