PerkinElmer Inc. (PKI) reported fourth quarter (ended Jan 3, 2010) earnings (excluding special items) of 43 cents per share, which was above the Zacks Consensus Estimate by 2 cents. The company had earned 46 cents in the year-ago quarter.

For full year 2009, the company earned (excluding special items) $1.27 per share, which was above the Zacks Consensus Estimate by 2 cents. The company had earned $1.41 in fiscal 2008.

Estimate Revisions Trend

There were no estimate revisions in either direction over the last 30 days from the 6 analysts covering the stock for the next quarter. The lack of directional pressure for the next quarter justifies our short-term recommendation reflected by Zacks Rank #3 (Hold).

Furthermore, over the last 30 days, none of the analysts covering the stock revised their earnings estimates in either direction for fiscal 2010. The lack of estimate revisions for 2010 in both directions indicates that there is no directional pressure on the performance of the stock in the upcoming quarters. As a result, our long-term recommendation on the stock remains “Neutral”.

Furthermore, the fundamentals of the company also support our short-term as well as long-term recommendations. While we are pleased with the company’s strong international presence and the broad product portfolio we remain concerned about the competition in the industry, characterized by rapid technological changes and evolving industry standards.

Additionally, even though the company relies on growth by acquisition and has completed several acquisitions over the past few years which have contributed to its growth, such a strategy has inherent risks. We recommend investors to retain the stock which is expected to perform in-line with broader U.S. equity market both over the next 1-3 months as well as the next 6-12 months.

Quarterly Results

Revenues for the quarter came in at $498.2 million as against $499.9 million in the previous year period. Revenues for the quarter were favorably impacted by foreign exchange and acquisitions by 4% and 1%, respectively.

Segment Information

PerkinElmer, which provides scientific instruments, consumables, and services to pharmaceutical, biomedical, environmental testing, chemical, and general industrial markets worldwide, operates through two business segments – Human Health and Environmental Health.

In the reported quarter, sales in the Environmental Health segment decreased approximately 1% to $304.1 million from $306 million in the year-ago quarter. The segment’s operating profit (excluding special items) came in at $44.5 million as against $53.3 million in the fourth quarter of 2008. The Environmental Health business accounted for 61% of total revenues in the fourth quarter.

Within the Environmental Health segment, the company serves the laboratory services, environmental, safety and security, and industrial end markets. They accounted for 20%, 17%, 13% and 11% respectively, of the total revenue in the reported quarter.

The quarterly sales in the Human Health division came in at $194.2 million, flat with the year-ago period. The division’s operating profit (excluding special items) came in at $36.7 million opposed to $36.4 million the year-ago quarter. The Human Health business accounted for 39% of the total revenues in the fourth quarter. Within Human Health, PerkinElmer serves the diagnostics and the research end markets. The former accounted for 21% of the total revenues for the quarter while the latter accounted for the balance.

Research and development expenses (excluding special items) for the quarter increased to $27.1 million from $24.8 million in the year-ago quarter. The increase was attributable to continued investments by the company towards developing innovative new products, applications and solutions the customers.

However, selling, general and administrative expenses (excluding special items) climbed to $124.7 million from $117 million in the fourth quarter of 2008. The increase was attributable to the foreign exchange impact and selling and marketing investments coupled with higher variable based compensation.

The company exited the reported quarter with approximately $379 million of debt (short and long-term debt less cash). PerkinElmer had approximately $180 million of cash and approximately $230 million of undrawn availability under its revolving line of credit with no mandatory maturities due until 2012 at the end of the fourth quarter of 2009.

Earnings Outlook

The company expects earnings (excluding special items) between $1.35 and $1.42 in fiscal 2010. The Zacks Consensus Estimate for 2010 is $1.39.

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