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Fitch Upgrades PerkinElmer Debt Rating

NEW YORK (GenomeWeb) – Fitch Ratings today upgraded PerkinElmer's issuer default rating to BBB from BBB-minus, citing the firm's improved operating profit and the potential for M&A. 

Fitch also said that PerkinElmer's rating outlook is stable. 

In a statement, the ratings firm noted that PerkinElmer's EBITDA margins have recently stabilized at about 20 percent, or an improvement of approximately 400 basis points from reported 2011 levels. Fitch said that it anticipates PerkinElmer will maintain these levels, and may even improve on them, as continued restructuring efforts will offset the effects of foreign exchange rates. 

On PerkinElmer's restructuring efforts, which have been ongoing for several years, Fitch said that the resulting cost savings "appear to be durable," and added that there is potential for further margin expansion by PerkinElmer, though at a slower rate than in recent years. 

In the near term, additional margin improvement is likely to come from shifts in product mix to higher-margin products and services, rather than additional restructuring programs, Fitch said. 

It also said that it expects organic revenues to improve in the low- to mid-single digits in 2015 and beyond on growing demand in the emerging markets and new products. As the global population expands and the middle class in emerging markets grows in size, the demand for diagnostic products in PerkinElmer's Human Health business will increase. Meanwhile, the firm's Environmental Health business should benefit from the greater need for food supply chain security and a worldwide shortage of clean water. 

On the M&A front, Fitch said that it believes PerkinElmer's main focus on capital deployment is asset purchases, "specifically small to moderately sized opportunities to gain access to technology and broaden the research and product portfolios, as well as targets in adjacent markets." 

Absent M&A opportunities, the ratings firm added, shareholder returns, particularly opportunistic share buybacks, will have priority over debt reduction. 

In addition to upgrading PerkinElmer's issuer default rating, Fitch increased the ratings on the company's senior unsecured credit facility and senior unsecured notes to BBB from BBB-minus. The rating changes apply to about $951 million of consolidated debt outstanding as of June 30. 

In afternoon trading on the New York Stock Exchange, PerkinElmer's shares inched up 1 percent to $49.14.