Pall Corporation (PLL) reported first-quarter fiscal 2012 earnings per share of 74 cents, above the Zacks Consensus Estimate of 65 cents and prior-year earnings per share of 62 cents. The company’s earnings benefited from strong sales, foreign currency and tax effect.
Total Revenue
Total revenue was $705.6 million, an increase of 16.5% year over year. The company’s sales for the quarter crossed $700 million for the first time. Orders in the quarter increased by 11% in terms of local currency (LC), as the company benefited in a number of regions. Orders in the company’s all three operating regions grew at double-digit rate. Sales and orders included foreign currency benefit of 4.6% and 5.2%, respectively.
The company’s investment in the developing economies paid off as the sales in these regions increased at the rate of 35%, with sales in the emerging markets comprising roughly 20% of Pall’s total sales. Pall also benefited from its recent acquisition in the Brazilian market.
Segment Revenue
Life Sciences segment sales were $356.1 million, up 14.3% year over year. Within the segment, BioPharmaceuticals sales were $196 million, Medical sales were $104.1 million and Food & Beverage sales were $56.0 million, up 21.4%, 5.6% and 8.5%, respectively. Pharmaceuticals sales benefited from the blooming Biotech market. Rising demand for I.V. filters with drug infusion pumps is a benefiting factor for Medical sales. Moreover, the emerging markets were a major driver for food and beverage sales.
Industrial segment sales were $349.5 million, up 18.9%. Within the segment, Energy and Water sales were $137.2 million, Aeropower sales were $133.7 million and Microelectronics sales were $78.6 million, up 34%, 14.7% and 4.9%, respectively. Commercial Aerospace sales increased over 14% while Military Aerospace sales witnessed a growth of 6%.
Income & Expenses
Operating margin was 17.2% in the quarter compared with 17.5% in prior-year period. Selling and general expense was $213.9 million compared with $182.3 million
Life Sciences segment’s profit came in at $89.0 million, up 22% while that of Industrial segment was $48.1 million, up 6%.
Balance Sheet & Cash Flow
Cash and cash equivalents amounted to $475.4 million at the end of the quarter compared with $557.8 million at the end of fiscal 2011. Long-term debt was $494.8 million compared with $492 million and shareholder’s equity was $1.54 billion compared with $1.49 billion in the year-ago quarter.
Outlook
Pall Corp. enjoys above-average financial returns and reasonable growth prospects due to several factors, including its highly-engineered technology, reliable global distribution, high share in market niches, long and close working histories with customers, few competitors and solid product quality supplemented by technical service.
The company’s Aero power business derives significant benefit from the emerging geographic markets, particularly in Asia. Key drivers include passenger air miles flown, military budgets, new military and commercial aircraft, and demand for new aircraft and mobile construction equipment.
The company derives a major portion of its revenue from outside the U.S. Operating results may be materially affected by changes in foreign currency rates. Further, Pall Corp. has a number of longstanding cost reduction and gross margin improvement initiatives. Unexpected delays or other factors in these initiatives could impact the company’s ability to realize the anticipated savings while improving its financial performance.
Based in New York, Pall Corporation was incorporated in July 1946. Along with its subsidiaries, Pall Corporation is a leading supplier of filtration, separation and purification technologies, having engineering capability and fluid management expertise.
We currently maintain our Neutral rating on Pall Corporation for the long term, with a Zacks #3 Rank (short-term Hold recommendation) over the next one-to-three months.
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