PerkinElmer Q2 Revenues Jump 29 Percent, Beat Analyst Estima

PerkinElmer reported after the close of the market on Wednesday that its second quarter revenues grew 29 percent year over year as the company beat analyst estimates on the top and bottom lines.
 
For the three months ended July 1, 2018, PerkinElmer reported revenues of $703.4 million compared to $547.0 million a year ago and topping the Wall Street expectation of $693.0 million. Organic revenue growth was 10 percent year over year.
 
Revenues from the company's diagnostics business grew 66 percent on a reported basis to $272.7 million from $163.8 million in the year-ago period. Diagnostics revenues increased 10 percent on an organic basis.
 
Revenues from the discovery and analytical solutions (DAS) business grew 12 percent on a reported basis to $430.6 million from $383.1 million in Q2 2017. On an organic basis, DAS revenues increased 10 percent.
 
On a conference call with analysts following the release of the earnings, PerkinElmer Chairman and CEO Robert Friel said the company is tailoring its portfolio to more attractive end markets and investing in innovative new products and services.
 
In the DAS business, he noted, "we are experiencing strong customer uptake of both our new imaging and analytical instrumentation, as well as solutions spanning informatics and service in both the pharma and applied markets."
 
And as for the diagnostics business, he added, the company's two major focus areas this year have been to identify key technology synergies with Euroimmun, which PerkinElmer acquired about a year ago, while maintaining its historical growth rate. "In our core diagnostic businesses, we are strengthening our respective franchises in reproductive health and genomics by expanding our detection capabilities, product and service offerings, and continuing to build out our presence in emerging markets," Friel said.
 
Friel also said that the Euroimmun business grew in the mid-teens through the first half of the year, and that PerkinElmer is ahead of schedule in its plans to integrate the two companies' product lines. Further, Euroimmun and Tulip, the privately held Indian diagnostics firm that PerkinElmer acquired two years ago, have been working together to develop new tests for infectious diseases, specifically for arboviruses in emerging markets.
 
He added that the firm's relatively new genomic testing business continues to see "very good uptake," and that it grew well in excess of 100 percent, though that started from a low base. The firm plans to continue providing confirmatory testing, and expanding its partnerships with pharma and biotech companies to treat rare diseases. "We'll probably put in another five NovaSeqs in September to handle what we expect to be the significant volume uptake here," Friel said.
 
Importantly, Friel noted that PerkinElmer has submitted its Vanadis NIPT diagnostic system for CE marking in Europe. "The reaction from prospective customers who were briefed on the system was very positive, and we expect to receive CE-IVD approval very soon," he said, adding, "We've effectively already identified 10 labs that will be getting the systems throughout the remaining part of 2018. And then, as we sort of ramp up production, we'll look to expand that across Europe, initially, and then ultimately, probably not until 2020, we'll look to expand into other geographic regions."
 
When asked about the firm's perfomance in China, Friel noted that PerkinElmer continues to do well in the country, and still sees it as a strong growth opportunity. But there are potential headwinds, given the US government's recent policy of levying tariffs against China, he added. Currently, that headwind is probably $1 million or less, Friel said, which could be absorbed in productivity or pricing.
 
"That's mostly coming from products produced in China and used in our supply chain. When you look at the other way, right now there's virtually no diagnostic product that comes from the US into China," he said. "On the DAS side, we think there is probably $75 million to $80 million of product that goes from US into China. And we've looked at our ability to move that production. Some of it we can move relatively quickly, others probably would take us six to nine months, and we're starting to put some contingency plans in place that would allow us to do that."
 
PerkinElmer hasn't put any plans into motion, he added, but those plans could be effectuated quickly if they're needed.
 
PerkinElmer reported a Q2 net income of $64.1 million, or $.57 per share, down from $204.1 million, or $1.84 per share in the year-ago period. On an adjusted basis, earnings per share was $.91, besting analysts' consensus estimate for EPS of $.86.
 
The company's Q2 R&D costs rose 40 percent to $47.2 million from $33.6 million, while its SG&A spending shot up 37 percent to $204.9 million from $149.9 million a year ago. PerkinElmer also reported a loss of $610,000 from discontinued operations and dispositions in the recently completed quarter compared to a gain of $141.3 million a year ago.
 
PerkinElmer ended the quarter with $163.4 million in cash and cash equivalents.
 
The company said that based on the strong quarter it is raising its full-year 2018 guidance for EPS from continuing operations to $2.39 from a previous forecast of $2.25. On an adjusted basis, the company raised full-year EPS guidance to $3.65 from previous guidance of $3.60. Analysts expect full-year EPS of $3.61.
 
On the conference call, PerkinElmer CFO James Mock said that the company is expecting third quarter reported revenues of $675 million, and adjusted earnings per share of $.92. Analysts are expecting revenues of $687.5 million and earnings of $.92 per share for Q3.
 
PerkinElmer's shares rose more than 4 percent to $83.39 in Thursday morning trading on the New York Stock Exchange.