PerkinElmer’s second-quarter results showed sequential improvement from a rough start to 2013, as the company saw signs of life in its industrial business and adjusted its cost structure to better navigate challenging macro environment.
Organic revenue bounced back to 3% growth year over year after declining in the first quarter. Some of the earlier headwinds dissipated in the quarter: in vivo imaging was up 20% in the quarter (helped by order delays experienced in the first quarter), Japan was up sequentially due to government stimulus, and industrial end markets bounced back nicely (although we anticipate this end market to remain soft throughout the 2013 and 2014).
Human health performance was also healthy in the quarter, as the company continues to benefit from the recovery in birth rates in the U.S. and expansion of its screening business globally. The company won additional newborn screening programs in Saudi Arabia and South Africa, and grew its infectious disease testing in China. Emerging markets remain an attractive business for PerkinElmer, as demand for testing instrumentation in both medical and environmental applications, particularly in China, remains robust.
The company once again saw margin compression in the quarter, but after being blindsided in the first quarter by rapid growth deceleration, it appears to be more prepared in terms of its cost structure going forward. PerkinElmer commenced another round of restructuring, with more plant consolidations and streamlining of operations in the developed world and facilities’ expansion in the emerging markets. This should enable it to see gross margin expansion in the second half of the year and 2014.
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