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Filtration and purification company Pall Corporation (NYSE:PLL) reported satisfactory fourth-quarter results Wednesday afternoon. Revenue grew 0.4% year-over-year (6% ex-currency) to $783.7 million, slightly better than the Street's consensus estimate. Earnings fell 11% year-over-year to $0.73 share, which was slightly worse than consensus expectations.

However, currency negatively impacted earnings by approximately $0.05 per share, fully contributing to the earnings miss. Going forward, the company guided to a strong fiscal year 2013, expecting pro forma earnings per share growth of 9%-16% for the year to the range of $3.05-$3.25, with the midpoint slightly stronger than the consensus estimate of $3.14.

Pall's life sciences segment grew nearly 1% (7.9% ex-currency) year-over-year to $334.6 million. The main contributor to growth was bio-pharmaceuticals sales, which accelerated 9% (16% ex-currency) year-over-year due to strong demand from biotechnology firms. We expect research and development spending in the healthcare segment to continue to grow at a strong pace, especially with patent cliffs looming and few blockbuster drugs on the horizon.

Food and beverage and medical sales were a bit weaker, falling 16% and 5% (-9% and +2% ex-currency), respectively. The firm noted slowness in Europe and a divestiture in Italy as the main drivers of weakness in the food and beverage segment, while performance in the medical segment was negatively impacted by channel changes. Regardless, the life sciences segment grew gross margins 170 basis points, to 57.7%.

The industrial segment wasn't quite as strong, but still grew 0.2% (5.2% ex-currency) to $387.7 million. Aerospace sales surged 17% (21% ex-currency) year-over-year, reflecting the strong expectations we continue to have about the aerospace supplier segment. Military sales grew 28%, while commercial sales expanded 12%. We continue to have high expectations for this segment, and we wouldn't be surprised to see continued outperformance from it in the coming fiscal year.

Process technologies revenue fell 2.4% (+3.8% ex-currency) thanks to strong demand in machinery and equipment, as well as power generation. On the other hand, weak demand from Asia continues to plague the microelectronics segment, which saw sales fall 4.1% year-over-year (-1.5% ex-currency). We aren't as optimistic about this portion of the business, though we think process technologies and aerospace will compensate for any weakness. Gross margins in the segment expanded 280 basis points to 46%, resulting in an overall profit increase of 39%.

Overall, we thought the firm's results were good, especially given the turmoil in Europe. However, the strong guidance stole the show - especially considering the firm embedded a negative currency impact of $0.22-$0.24 in its forecast.

Nevertheless, we think shares look a bit rich at their current valuation, scoring just a 3 on the Valuentum Buying Index (our stock-selection methodology). The company also trades at a premium to its peers, so we'd have to see a considerable price decline before having a sufficient margin of safety to establish a position in the portfolio of our Best Ideas Newsletter.

Source: Pall Corporation Surges On Strong Outlook