Why Shares of Pall Corporation Are at All-Time Highs

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Pall Corporation (NYSE:PLL) is a massive multi-sector corporation. The company’s stock is around all-time highs. This company has branched out into multiple areas to generate revenues. It manufactures and markets filtration, separation, and purification products and integrated systems solutions worldwide. It operates in two segments, life sciences and industrial.

The life sciences segment provides technologies that facilitate the process of drug discovery, development, regulatory validation, and production used in the research laboratories, pharmaceutical, biotechnology, and food and beverage industries, as well as in hospitals at the point of patient care. It offers medical products to control the spread of infections in hospitals; cell therapy products that enable technologies for the regenerative medicine market; and various filtration and purification technologies, associated hardware, and engineered systems for the development and commercialization of chemically synthesized and biologically derived drugs, plasma, and vaccines, as well as offers filtration solutions. This segment also provides validation services to drug manufacturers; laboratory products for use in drug research and discovery, quality control testing, and environmental monitoring applications; and serves the filtration needs of beer, wine, dairy, alcohol-free beverage, bottled water, and food ingredient markets.

Its industrial segment provides various technologies to producers and users of energy, oil, gas, renewable and alternative fuels, power, chemicals, and water; and filtration solutions to the machinery and equipment markets. This segment also offers filtration and fluid monitoring equipment for use on commercial and military aircraft, ships, and land-based military vehicles in the aerospace industry; filtration and purification technologies for the semiconductor, data storage, graphic arts, display, and electronic components markets; and a suite of contamination control solutions for chemical, gas, water, chemical mechanical polishing, and photolithography processes. Through all of these activities, Pall Corporation is reaching fresh new highs for its shareholders. Sales and earnings are extremely strong.

Third quarter sales were $682.4 million compared to $641.2 million last year, an increase of over 6 percent compared to last year. Sales in local currency were up about 7 percent. Diluted earnings per share were $0.80 in the quarter, compared to $0.65 last year. Pro forma diluted earnings per share were $0.81, a 9 percent increase compared to $0.74 a year earlier, including a negative impact of approximately $0.01 from foreign currency translation. Sales in the last nine months were $1.99 billion, an increase of 3 percent compared to last year. Sales in local currency were up 4 percent. Diluted earnings per share were $2.17 in the nine months, compared to $2.13 last year. Pro forma diluted earnings per share were $2.33, an 8 percent increase compared to $2.15 a year earlier, including a negative impact of approximately $0.07 from foreign currency translation. A specific break down of performance by sector is as follows:

  • BioPharmaceuticals: Consumables sales grew 12 percent compared to last year, on overall strength and the benefit of ecent acquisitions.
  • Food and Beverage: Consumables sales grew 8 percent compared to last year, on strength in the Americas and Asia.
  • Medical: Consumables sales grew 3 percent compared to last year, on the benefit of OEM sales from another recent acquisition, Medistad.
  • Systems: Sales grew 48 percent compared to last year, on timing of both BioPharmaceuticals and Food & Beverage projects.
  • Process Technologies: Consumables sales were flat compared to last year, on growth in Machinery & Equipment and Power Generation offset by decline in Fuels & Chemicals.
  • Aerospace: Consumables sales decreased 13 percent compared to last year, on difficult year-over-year comparisons from large aftermarket sales and helicopter program shipments in Q3 of last year that did not repeat.
  • Microelectronics: Consumables sales grew 18 percent compared to last year, on continued market strength as well as new business wins.
  • Systems: Sales decreased 2 percent compared to last year, primarily due to a decline in capital spend on Fuels & Chemicals projects.

In regard to the recent performance, Larry Kingsley, Pall Chairman and CEO, stated, “We performed well on the top line up 7 percent excluding foreign exchange and including the impact of acquisitions. We also had our second consecutive quarter of double-digit orders growth. We remain firmly on track to deliver on our plan for the year of mid-single digit top line growth and pro forma earnings per share in the range of $3.35 to $3.45, which would represent growth of 1013 percent over fiscal 2013.”

While sales were up in most areas, they were down in several, including aerospace and fuel/chemicals. That said, revenues were up substantially year over year as were earnings. Given the outlook for the company being firmly reiterated by the company, I believe Pall Corporations’ stock will continue to press higher in the coming months.

Disclosure: Christopher F. Davis holds no position in Pall Corporation and has no plans to initiate a position in the next 72 hours. He has a buy rating on the stock and a $95 price target.

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