Like other life-sciences companies, PerkinElmer (PKI) shifted its business in 2020 to help address the coronavirus pandemic, explains Richard Moroney, editor of Dow Theory Forecasts.
Its diagnostics segment created coronavirus tests to go along with existing RNA-extraction products. PerkinElmer also helped labs in California and the U.K. boost capacity by supplying its own workers, equipment, and supplies.
These moves proved fortuitous. PerkinElmer shipped more than 25 million coronavirus tests last year to more than 1,000 new customers, resulting in pandemic-related revenue topping $1 billion, or roughly 26% of annual sales.
In the December quarter, the coronavirus accounted for 41% of the company’s revenue. Both earnings per share and cash from operations more than doubled in 2020, while sales climbed 31%. The shares responded by rallying 48% last year.
As with its peers, the big question facing PerkinElmer is whether the company can keep growing as we move out of the darkest days of the pandemic.
For its part, management anticipates increased clinical focus on infectious diseases and autoimmune disorders in a post-pandemic world. It will also have the opportunity to serve a far larger customer base than it had before 2020.
Perkin Elmer operates two segments. Diagnostics (55% of 2020 revenue, 79% of operating profit) offers instruments, reagents and tests that screen for genetic abnormalities, disorders, and infectious diseases.
Discovery and analytical solutions (45%, 21%) produces reagents and imaging technology, as well as analytical tools. Until the pandemic, the discovery and analytical solutions business had been the larger segment (61% to 73% of sales from 2015 to 2019).
Management expects March-quarter earnings per share of at least $3.00, versus $0.67 a year ago, on sales growth of 82%; both targets topped analyst estimates. PerkinElmer’s 2021 guidance appears more conservative, targeting minimum growth of 2% for earnings and 8% for sales.
Both full-year targets fell short of the then-consensus, though analysts have continued to ratchet their estimates higher in the days since the report.
The consensus now calls for PerkinElmer to increase 2021 earnings per share 10% and revenue 11%. PerkinElmer’s 2021 guidance anticipates that coronavirus-related sales will hold fl at from 2020 levels, with half of its 2021 projected pandemic revenue occurring in the March quarter alone.
That leaves room for upside if the pandemic is prolonged by vaccine shortages or the emergence of increasingly contagious variants.
Additionally, management expects non-coronavirus organic sales to rise 5% to 7% this year, though growth could exceed those targets if the economy returns to normal faster than expected.
PerkinElmer has a track record for managing expectations, having met or exceeded the consensus profit target in nine straight quarters. The stock trades at 17 times trailing earnings, below the S&P 1500 healthcare sector median of 30 and the life-sciences industry median of 39. PerkinElmer is a Long-Term Buy.
