PerkinElmer Delivers Solid Q4 Results, but Short-Term Headwinds Affect 2023 Guidance

Narrow-moat PerkinElmer reported fourth-quarter results that slightly exceeded expectations, but its guidance looks weak for 2023, as demand from pandemic-related products will dissipate in a more endemic situation. We have made slight adjustments to our projections to account for a complete removal of COVID-19-related sales and slowing demand affecting 2023 guidance, but we are maintaining our $162 fair value estimate. Shares still appear undervalued, and investors should note that PerkinElmer is on track to fully divest its analytical and enterprise business in the near future.

In the quarter, revenue (from continuing operations) declined 13% year over year while sales excluding COVID-19-related operations grew 9% year over year. By business, the diagnostic segment (representing 53% of total continuing operations) declined 44% year over year in the quarter. On a non-COVID-19 basis and excluding the immunodiagnostics business in China, sales grew 4% year over year. Perkin’s immunodiagnostic business—a strong revenue driver and competitive advantage for the company—was hurt by lockdowns in China. The company assumes this business will not normalize until the second half of 2023. Although Perkin’s reproductive health business experienced a slight decline in the quarter, it delivered mid-single-digit growth for the full year. Favorable trends in Europe offset flatness in Asia and slowing birth rates in the Americas. We remain optimistic about this business, as Perkin continues to expand its menu offering and geographic reach in its reproductive health business. The company’s applied genomics business declined slightly in the quarter but experienced high-single-digit growth for the year. The discovery and analytical solutions business grew 9% year over year. Growth was due to the life science’s pharma business with double-digit, solid growth from reagents, instrumentation, and software.