Revvity Earnings: 2023 Outlook Cut Mildly on Life Sciences Uncertainty, China Diagnostics Weakness

Narrow-moat Revvity PKI (formerly known as PerkinElmer) reported weak first-quarter results that were about as expected but trimmed its guidance for the full year, which appears to be pushing down shares in early trading. At first glance, our bottom-line assumptions remain within management’s new guidance range, and we do not anticipate changing our $162 fair value estimate based on this announcement. The shares still appear moderately undervalued to us.

In the quarter, the company’s results reflected a sharp contraction in COVID-19-related sales, particularly in the diagnostics business. Revenue declined 27% on an organic basis while sales excluding COVID-19-related products grew 6% year over year. By business, the diagnostics business (representing about half of sales) declined 44% organically in the quarter as the pandemic and related demand retreated year over year. The life sciences business (the other half) was sturdier, increasing 9% year over year on an organic basis.

The company reduced its 2023 guidance a bit to reflect the increasing uncertainty surrounding target end markets, including the effects of the China lockdowns on its diagnostics business and uncertainty at biopharmaceutical clients, especially early-stage firms that are active in drug discovery applications, where Revvity primarily operates. For 2023, Revvity now expects $2.90 billion-$2.94 billion in sales (down from $2.94 billion previously) and adjusted EPS of $4.85-$5.05 (down from $5.05 previously). While we may tinker with our sales assumption a bit, our bottom-line assumption was already within management’s new guidance range, and we do not anticipate changing our fair value estimate based on this modest change in our near-term forecast, especially since our fair value estimate is more heavily determined by long-term expectations.