PerkinElmer (PKI) Down 6.9% Since Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for PerkinElmer, Inc. (NYSE:PKI) . Shares have lost about 6.9% in the past month, underperforming the market.

Will the recent negative trend continue leading up to its next earnings release, or is PKI due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Recent Earnings

PerkinElmer reported fourth-quarter 2017 adjusted earnings of 97 cents per share, beating the Zacks Consensus Estimate of 94 cents.

The company, based in Waltham, MA, reported adjusted revenues of approximately $641.6 million, which beat the Zacks Consensus Estimate of $617 million. Revenues also surpassed the year-ago figure of $567 million.

Segment Details

Discovery & Analytical Solutions (DAS)

Revenues from DAS totaled $448.2 million in the fourth quarter, up 9.3% from $409.9 million in the year-ago quarter. PerkinElmer has been focusing on finalizing the organizational changes associated with the life sciences business in the DAS unit.

Coming to the profits at the DAS segment, the company reported fourth-quarter 2017 adjusted operating income of $93.7 million, up from $82.9 million in the year-ago quarter. As a percentage of revenues, adjusted operating profit margin was 20.9%, UP 70 basis points (bps) year over year.

Diagnostics segment

Revenues were $193.4 million compared with $156.8 million in the year-ago quarter. This reflects an improvement of 6% organically.

The divestment of medical imaging business and the acquisition of EUROIMMUN Medical Laboratory Diagnostics AG has been the major driver for the segment. PerkinElmer announced the completion of the buyout of EUROIMMUN for approximately $1.3 billion in cash in December 2017. EUROIMMUN is an autoimmune testing company and an emerging player in infectious disease and allergy testing.

Meanwhile, operating profit margin in the segment, as a percentage of revenues, was 30.8%, up 20 bps year over year.

Financial Details

At the end of the quarter, operating cash flow from continuing operations was approximately $292 million, which includes $17 million of EUROIMMUN deal related cost and prepaid royalties. The company ended the year with approximately $2 billion of debt and $202 million of cash.

Guidance

The company issued adjusted earnings guidance for 2018. PerkinElmer expects adjusted earnings of $3.50 per share. Further, it expects reported revenues in the range of $2.72-$2.74 billion, which includes approximately $25 million in foreign exchange tailwinds and approximately $360 million reported revenues from EUROIMMUN. PerkinElmer projects 5-6% organic revenue growth in 2018.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.

PerkinElmer, Inc. Price and Consensus

PerkinElmer, Inc. Price and Consensus | PerkinElmer, Inc. Quote

VGM Scores

At this time, PKI has a subpar Growth Score of D, however its Momentum is doing a bit better with a C. Charting a somewhat similar path, the stock was also allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

The stock is suitable solely for momentum based on our style scores.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Interestingly, PKI has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.