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Evercore ISI Upgrades PerkinElmer, Downgrades Hologic

NEW YORK – Evercore ISI on Thursday upgraded PerkinElmer's shares to Outperform from a prior In Line rating, but the investment bank downgraded Hologic's stock to In Line from an Outperform rating.

In a research note, analyst Vijay Kumar said PerkinElmer is "massively underappreciated" by investors and noted that even in the midst of a challenging 2019, in which the firm's China food business faced headwinds, resulting in a cut in its revenue guidance, PerkinElmer delivered on its triple digit operating margin targets. The achievement "has gone under the radar," he said and "as China [headwinds] abate, new products kick in and [the macroenvironment] improves, we love the setup on" the company into the new year.

Along with the rating upgrade, Evercore targeted PerkinElmer's stock price at $114 per share.

Kumar also said that investors may not understand the opportunity that is represented by PerkinElmer's Vanadis noninvasive prenatal cell-free DNA testing platform. He said that while the company assumed more placements of the system in 2019, but ended with more reagent rentals, leading to a $2 million headwind to guidance in the just-finished year, Vanadis should be "viewed as another notch" in PerkinElmer's reproductive franchise to help drive growth in the midterm.

Company officials recently said that the firm has started targeting labs in different regions with Vanadis and plans to publish a European clinical validation study this summer. It also began accepting clinical samples at its US lab and an affiliate lab in Malaysia.

On Euroimmun, Kumar said it the business is expected to continue making inroads into the US market with an expanded menu, including new autoimmune tests, which would "help it become the first line test opportunity as soon as [a] patient shows symptoms."

In early morning trading on Thursday, PerkinElmer's shares on the Nasdaq rose 1 percent to $98.25.

Along with the downgrade on Hologic, Evercore set a new price target on the company's stock at $55 per share.

Kumar said in a research note that Hologic's divestiture of its Cynosure medical aesthetics business gives the firm an opportunity to focus on its core business.

But he also noted that Hologic acquired Cynosure in 2017 for $1.6 billion and the sale price of about $140 million "gave rise to speculation whether the asset sale was hurried."

The investment bank thinks Hologic's "shares are fairly valued on a fundamental basis at current levels," he said, adding, "While it is possible there could be upside from strategic optionality, it is tough for us to speculate and hence we are moving to the sideline."

He noted that Evercore's decision about Hologic's ratings were influenced by a recent "surprise" announcement by Qiagen that it has decided to remain a stand-alone business despite receiving a number of conditional, non-binding indications of interest from potential merger or acquisition partners.

In early morning trading on the Nasdaq, Hologic shares were down less than one percent at $52.

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