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SIVY ON STOCKS from CNNmoney.com
Wednesday, November 21, 2001 ******************[ A D V E R T I S E M E N T ]**************** QUICK! If you won $25,000 CASH what would be on your "Best Of" list? Keep thinking because here's a chance to try to win the $25,000 Grand Prize. BONUS: See what else has been selected "Best Of" at money.com and try an issue of MONEY Magazine FREE! Click Here: http://www.money.com/bestof **************************************************************** Accelerating growth Share prices suggest a 2002 rebound; PerkinElmer's growth poised to pick up. By Michael Sivy NEW YORK (CNN/Money) - Investors know that earnings for the current quarter will be lousy. And they've written off results for the first quarter of next year as well. At this point, share prices reflect hopes for the second quarter of 2002. Nonetheless, the Dow has moved up almost 20 percent since its low of 8,236 on Sept. 21, fueled largely by falling interest rates and investors' expectations of those eventual earnings rebounds. After declining steadily since June, 10-year bond yields have turned up in the past three weeks. This reversal reflects improving consumer confidence, a drop-off in new unemployment claims and other data suggesting that an economic upturn may finally be under way. At the same time, however, those higher interest rates temporarily undercut stock prices. In addition, stocks could be knocked back by any unusually bad earnings surprises, by negative guidance for next year's results, or by another unexpected terrorist attack. Those possibilities have some market strategists worrying that stocks have run too far too fast. As a result, the most timely shares in this environment are those whose prices have not made a big move since mid-September, but which still enjoy strong growth prospects. PerkinElmer (PKI: down $0.33 to $28.55, Research, Estimates) is a mid-sized diversified technology company with annual revenue of just under $2 billion. Since 1998, profit growth has been accelerating. After single-digit annual earnings gains in the early 1990s, growth picked up to a compound 13 percent in the past five years. And it's projected to top 17 percent annually during the next five years, supported by a return on equity of close to 20 percent a year. One of the most important factors sustaining PerkinElmer's accelerating profit growth is the company's emphasis on its most promising businesses - and its efforts to build those franchises. Two weeks ago, PerkinElmer completed the acquisition of Packard BioScience, a leader in drug-discovery systems. The acquisition strengthens PerkinElmer's life-sciences division, which accounted for 16 percent of last year's operating income. The company's two other fast-growing divisions are optoelectronics (33 percent of income) and instruments (32 percent). PerkinElmer has announced plans to shed slower growing operations, most notably its fluid sciences division, as well as some other minor lines. Third-quarter results show how those moves will boost the company's growth: While net income was up 16 percent, earnings from the operations PerkinElmer's plans to retain rose 27 percent. Economic weakness may limit earnings growth this quarter and next. And dilution from the acquisition from the Packard acquisition will erode full-year results a bit. But analysts still expect profit growth of around 13 percent for 2002, accelerating to the high teens from 2003 onward. At a current share price of $28.50, PerkinElmer trades at less than 23 times projected 2002 earnings. That's quite reasonable for a stock with such attractive niche businesses. ### Read all of Michael's columns at: http://money.cnn.com/markets/sivy/ To subscribe or unsubscribe to Sivy on Stocks, go to: http://money.cnn.com/email/ -------------------------------------------------- DEVELOP CONFIDENCE TO MAKE MONEY IN ANY MARKET WITH THE MONEY'S COACHING FOR INVESTORS program! 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