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PerkinElmer Q3 Revenues Grow 5 Percent

NEW YORK – PerkinElmer reported after the close of the market a 5 percent year-over-year increase in revenues for the third quarter, falling short of the consensus Wall Street estimate.

For the three months ended Sept. 29, the Waltham, Massachusetts-based firm said that revenues grew to $706.9 million, up from $674.3 million in Q3 2018. The analysts' average estimate was $715.9 million.

Organically revenues grew also at 5 percent year over year.

"Importantly our key growth areas are continuing to gain traction and scale and remain on track to achieve or exceed our previously communicated goals," said PerkinElmer Chairman and CEO Robert Friel on a conference call, his last as head of the company before he retires at the end of December as previously reported. Prahlad Singh, currently president and COO of PerkinElmer, will become CEO.

While the organic revenue growth is lower than the company had expected due to market headwinds in the applied markets and timing in revenues in diagnostics, Friel said neither are expected to be mid- or long-term challenges to the firm's high-single digit revenue growth model.

By segment, diagnostics revenues grew 4 percent to $280.0 million from $268.1 million a year ago while discovery and analytical solutions revenues rose 5 percent to $426.9 million from $406.2 million.

The diagnostics business was up 6 percent year over year organically on strength in immunodiagnostics and reproductive health, PerkinElmer CFO Jamey Mock said on the call.

DAS was up 4 percent organically with strength in the life sciences, partially offset by "tepid" demand in the applied markets, Mock noted.

In diagnostics, Singh said that the Vanadis noninvasive prenatal testing system continues to gain traction, and inquiries from potential customers have ramped up following the publication of a clinical study in August in Prenatal Diagnosis, which found that the technology had high sensitivity and specificity for trisomies 21, 18, and 13, while it also accurately determined fetal sex and maintained a low failure rate.

Year to date, PerkinElmer has 19 Vanadis systems installed or in the process of being installed and the company remains on track to achieve 30 installations for the year, Singh said.

On Tuesday, the company announced it will begin processing samples with Vanadis at its lab in Pittsburgh and an affiliate lab in Kuala Lumpur, Malaysia.

PerkinElmer also will offer carrier screening and preeclampsia testing, "which along with Vanadis … will serve to further differentiate us in the US market and provide a much better customer experience," Singh said.

Vanadis is currently available in the US and Asia for research-use only.

Meanwhile, Euroimmun continued to grow at a double-digit rate on strong demand in China, Mock said, while cannabis testing and genomics testing was on pace to meet or exceed the firm's initial goals for 2019.

PerkinElmer's R&D spending in Q3 2019 was trimmed 7 percent to $45.4 million from $48.8 million a year ago, but its SG&A costs grew 4 percent to $204.2 million from $196.8 million. The company's restructuring and contract termination charges more than doubled year over year to $14.1 million from $6.5 million.

It reported a profit of $58.6 million, or $.52 per share, for the recently completed quarter compared to a profit of $76.5 million, or $.69 per share, a year ago. Adjusted EPS for Q3 2019 was $1.06 and beat the consensus Wall Street estimate of $1.01.

The company also announced that it has acquired Chinese food safety testing company Meizheng Group. Based in Beijing, Meizheng's product portfolio includes immunoassay, microbiology, and molecular testing across end markets such as grain and milling, dairy, and meat and seafood.

Mock said the net purchase price for the acquisition was about $152 million, and PerkinElmer expects a double-digit return on the investment by year four of the deal. Estimated 2019 revenue for Meizheng is $30 million, he added.

For the fourth quarter, Meizheng is expected to contribute less than 1 percent to revenue growth.

PerkinElmer said the acquisition will expand its food safety capabilities into "attractive markets, including pathogen, toxin, and drug residue testing." On the call Friel added that the acquisition is consistent with the firm's purchase of Cisbio Bioassays in April as it "is focused on an attractive end market, increases our consumables mix, and expands our scientific and technological capabilities in adjacent technologies."

PerkinElmer exited the third quarter with $393 million in cash and cash equivalents.

For Q4, revenues are expected to be $800 million, Mock said, while adjusted EPS is expected to be $1.32.

Full-year 2019 revenues were guided to approximately $2.88 billion. PerkinElmer revised its guidance for EPS from continuing operations to $2.21. Adjusted EPS is expected to be $4.07.

In July, PerkinElmer said that EPS from continuing operations for full-year 2019 was expected to be in the range of $2.61 to $2.66. Full-year Non-GAAP EPS was expected to be between $4.02 and $4.07.

Late Wednesday Piper Jaffray downgraded PerkinElmer to a Neutral rating. In a research note, analyst William Quirk said that the company faces macro headwinds, and he has "lowered confidence in management's ability to hit forward expectations" 

Further, PerkinElmer said that in Q3 2019, it consolidated its genomic labs into its Pittsburgh facility, which also negatively impacted revenues for the quarter. "The lab move will not fully be back to its former capacity until 2020, which prolongs the revenue drag," Quirk wrote.

He also reduced his price target on PerkinElmer's shares to $89 from $104.