PerkinElmer Inc. (PKI) is slated to announce fourth-quarter and full-year 2014 results on Jan 29, 2015. Note that the company has posted an average positive earnings surprise of 2.8% over the last four quarters.
Let’s see how things are shaping up for this announcement.
Factors at Play
The company’s third-quarter 2014 results failed to impress us. Although earnings were in line with the Zacks Consensus Estimate, revenues lagged the same. Following disappointing results, management also trimmed its earnings projection for full year 2014.
Meanwhile, a sluggish European macro-environment continues to impact PerkinElmer’s organic growth. Further, the company’s environmental business is facing issues in China with respect to tenders that are awaiting government approval and funding.
The company’s research business continues to be a weak link, owing to softness in academic end markets.
PerkinElmer’s gross margin continues to remain under pressure due to unfavourable foreign exchange (stronger dollar), higher mix of lower margin service revenues and a negative impact from expansion into emerging economies.
Earnings Whispers?
Our proven model does not conclusively show that PerkinElmer is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. This entails an ESP of -1.28% for PerkinElmer as the Most Accurate estimate stands at 77 cents while the consensus estimate is pegged higher at 78 cents.
Zacks Rank: PerkinElmer has a Zacks Rank #3 (Hold) which increases the predictive power of ESP. However, we need to have a positive ESP to be confident of an earnings surprise.
On the other hand, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Other Stocks to Consider
Here are some stocks that you may want to consider, as our model shows these have the right combination of elements to post an earnings beat this quarter:
Intersect ENT (XENT) has an earnings ESP of +11.11% and carries a Zacks Rank #2 (Buy).
Hologic (HOLX) has an earnings ESP of +2.78% and carries a Zacks Rank #2.
AbbVie (ABBV) has an earnings ESP of +1.18% and carries a Zacks Rank #2.
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