Pall Corp (NYSE:PLL) has a corporate mission of "making the world safer, greener and better." Its key way of doing this is through the sale of filters and related devices that remove contaminants from life science materials and water and related liquids in the industrial sector. Its businesses have great potential, but the potential for above-average shareholder returns is currently uncertain.
Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

Second Quarter Recap
Sales advanced 8.2% to just a hair shy of $698 million. Pall breaks its operations into two divisions. The Life Sciences unit is the largest and grew 6.9% to $357.2 million, or 55.9% of second quarter sales. Pall sells technologies to help its clients research, discover, develop and produce drugs and related healthcare products. Specific products include blood filtration devices and hospital infection control systems at underlying clients that likely include Health Management Associates (NYSE:HMA) and HCA (NYSE:HCA) hospitals. The remaining $340.8 million stemmed from the Industrial segment that 9.6%. This business consists of helping industrial clients, including commercial aerospace firms such as Boeing (NYSE:BA) and industrial manufacturers such as General Electric (NYSE:GE) filter and process fluids.

Sales costs grew more slowly than sales, but operating SG&A expenses grew faster than the top line to result in operating income growth of 7.8% that slightly lagged sales growth. Operating profit came in at $123.5 million, or 17.7% of total sales for a very healthy operating profit margin. However, lower income tax expense helped send net income up 12% to $84.7 million. Share buybacks pushed per-share earnings up a bit further as earnings per diluted share increased 12.5% to 72 cents. Management estimated 76 cents in diluted earnings when looking at its recurring business. For related reading, see Zooming In On Net Operating Income.

Outlook
For the full year, analysts' project total sales growth in excess of 6% and total sales of nearly $3 billion. They expect earnings of $3.17 per share for annual growth in the neighborhood of 19%.

The Bottom Line
Nearly half of Pall's business stems from the cyclical industrial market, but its sales held up well during the credit crisis and ensuing global recession. Its Life Science focus is certainly a strong point during economic downturns, and its overall product mix appears to be stable and exposed to a strong secular trend of water and energy management, environmental and regulatory requirements and continued advances in medicine.

At a forward P/E close to 17, many investors are already aware of Pall's appealing businesses and their global growth potential. Free cash flow multiples are even higher as annual capital expenditure needs take up a higher percent of annual operating cash flow. Overall, the company is worth monitoring closely, as is the stock for a potential pull back to more reasonable valuation levels.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
At the time of writing Ryan C. Fuhrmann did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Stock Analysis

    How Medtronic Makes Money (MDT)

    Here's the story of an American medical device firm that covers almost every segment in medicine and recently moved to Ireland to pay less in taxes.
  2. Investing News

    Latest Labor Numbers: Good News for the Market?

    Some economic numbers are indicating that the labor market is outperforming the stock market. Should investors be bullish?
  3. Investing News

    Stocks with Big Dividend Yields: 'It's a Trap!'

    Should you seek high yielding-dividend stocks in the current investment environment?
  4. Investing News

    Should You Be Betting with Buffett Right Now?

    Following Warren Buffett's stock picks has historically been a good strategy. Is considering his biggest holdings in 2016 a good idea?
  5. Products and Investments

    Cash vs. Stocks: How to Decide Which is Best

    Is it better to keep your money in cash or is a down market a good time to buy stocks at a lower cost?
  6. Investing News

    Who Does Cheap Oil Benefit? See This Stock (DG)

    Cheap oil won't benefit most companies, but this retailer might buck that trend.
  7. Investing

    How to Ballast a Portfolio with Bonds

    If January and early February performance is any guide, there’s a new normal in financial markets today: Heightened volatility.
  8. Stock Analysis

    Performance Review: Emerging Markets Equities in 2015

    Find out why emerging markets struggled in 2015 and why a half-decade long trend of poor returns is proving optimistic growth investors wrong.
  9. Investing News

    Today's Sell-off: Are We in a Margin Liquidation?

    If we're in market liquidation, is it good news or bad news? That party depends on your timeframe.
  10. Investing News

    Bank Stocks: Time to Buy or Avoid? (WFC, JPM, C)

    Bank stocks have been pounded. Is this the right time to buy or should they be avoided?
RELATED FAQS
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center