PerkinElmer (PKI) Beats Q2 Earnings, FY16 View Maintained

PerkinElmer Inc (NYSE:PKI) reported second-quarter 2016 earnings of 67 cents per share, which beat the Zacks Consensus Estimate by a penny. Additionally, the figure was better than the management’s guided range of 65—66 cents. Earnings also increased 11.7% year over year driven by modest top-line growth and margin expansion.

Revenues increased 1.5% on a year-over-year basis to $572.8 million, which lagged the Zacks Consensus Estimate of $573 million, but was within the management’s guided range of $570-$575 million. The year-over-year upside was primarily attributed to growth across both segments.

Organically, revenues grew 3% in the quarter, but missed the company’s expectations of 4% growth. Management stated that organic revenue for four of its focus areas grew by more than 10% in the reported quarter. The focus areas are food quality and safety, pharma services and solutions, reproductive health, and emerging market diagnostics. Per PerkinElmer, these focus areas represent 40% of its total revenues.

In terms of end-market, PerkinElmer witnessed accelerating diagnostic demand, healthy pharma and biotech as well as a strong demand for food applications during the quarter. This was partially offset by weakness in industrial markets as well as soft academic and government demand, primarily in the U.S. during the quarter.

Region-wise, PerkinElmer achieved double-digit organic revenue growth in Asia and low single-digit growth in Europe, while revenues declined in low single-digit in the Americas. Emerging markets organic revenues increased mid-teens, driven by a strong performance in China, which more than offset weak demand in Brazil.

Organic revenue growth in China grew double digit in the quarter, with broad-based strength across both Human and Environmental Health segments. Within Environmental Health, Haoyuan blood screening business reported robust revenue performance, with strength expected to continue into the second-half 2016. On the Environmental side, food and environmental testing solutions were the key growth drivers in China.

Segment Details

Human Health (61.7% of total revenues) segment revenues increased 3.5% year over year to $353.7 million, while Environmental health (38.3% of total revenues) revenues decreased 1.4% year over year to $219.2 million in the quarter. Environmental Health organic revenues declined 1% in the quarter, while Human health increased 6%.

On an organic basis, diagnostics business (29% of Human Health revenues) revenue growth was driven by double digit growth in the company’s core diagnostics franchises. Both China and India were up more than 25% in the quarter. The company also won a number of neonatal wins in Pakistan, Jordan and Poland.

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Medical imaging declined high single digits due to continued weak hospital demand. However, an increased demand for a number of new CMOS applications was witnessed as diversification efforts within the portfolio gain traction.

Life Science Solutions (33% of Human Health revenues) organic revenues increased in low single-digits.

Margin Details

Adjusted gross margin was 47.9%, up 90 basis points (bps) year over year, driven by successful cost-cutting (Lean) initiatives, volume leverage and favorable product mix.