PerkinElmer (PKI) To Acquire German Firm EUROIMMUN For $1.3B

Waltham, MA-based PerkinElmer Inc. (NYSE:PKI) , a worldwide provider of products, services and solutions to the diagnostics, research, and laboratory service markets, recently announced that it would acquire EUROIMMUN Medical Laboratory Diagnostics AG for approximately $1.3 billion in cash. The latter is an autoimmune testing company and an emerging player in infectious disease and allergy testing.

Stock Performance

The price performance of PerkinElmer has been unfavorable in the last three months. The stock gained 19.08%, underperforming the Zacks classified Instruments – Scientific sub-industry’s gain of almost 19.31%. The current level compares favorably with the S&P 500’s return of 5.16% over the same time frame.

The estimate revision trend for the current year was favorable in the last two months. Ten estimates moved north against no movements in the opposite direction. Notably, the current year estimate for the stock increased by 5 cents to $2.86 per share over the same time frame.

We feel the acquisition is a sound move on the part of PerkinElmer. Lubeck, Germany-based EUROIMMUN, which has about 2,400 employees, has an annual turnover of about $310 million. In 2016, the latter generated sales in more than 130 countries worldwide, with approximately 45% of revenues coming from China, 30% from Europe, Middle East & Africa, 5% from the Americas and 20% from Rest of the World. The deal is expected to close in the fourth quarter of 2017.

The acquisition of EUROIMMUN Medical Laboratory Diagnostics would expand PerkinElmer’s reach into autoimmune and allergy diagnostic markets. The acquisition would also reinforce PerkinElmer’s capabilities toward new infectious disease in the Chinese market. Per management the acquisition is expected to add about 28 cents to 30 cents per share to its 2018 adjusted earnings.

PerkinElmer offers a global diagnostics portfolio focused on: reproductive health, infectious disease screening and genomics offerings for oncology and other molecular tests. It has approximately 9,500 employees serving customers in more than 150 countries.

In recent times, PerkinElmer delivered a solid first quarter, beating the Zacks Consensus Estimate on both counts. The quarter witnessed solid organic revenue growth across all the business segments. Furthermore, a positive guidance instills our confidence on the stock. The company continues to offer a global diagnostics portfolio focused on reproductive health, infectious disease screening and genomics offerings for oncology and other molecular tests. Despite having a solid portfolio, unfavorable foreign exchange is a primary concern for PerkinElmer.

Zacks Rank & Key Picks

Currently, PerkinElmer carries a Zacks Rank #3 (Hold).

Some better-ranked medical stocks are Align Technology, Inc. (NASDAQ:ALGN) , Inogen, Inc. (NASDAQ:INGN) and Accelerate Diagnostics, Inc. (NASDAQ:AXDX) . Both Align Technology and Inogen sport a Zacks Rank #1 (Strong Buy), while Accelerate Diagnostics carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Align Technology has an expected long-term adjusted earnings growth of almost 24.1%. The stock has added roughly 21% in the last three months.

Inogen has a long-term expected earnings growth rate of 17.5%. The stock has a solid one-year return of around 96%.

Accelerate Diagnostics has an expected long-term adjusted earnings growth of 30%. The stock has added roughly 17% in the last three months.

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