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Thermo Fisher (TMO) Q4 Earnings Top Estimates, Gross Margin Down
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Thermo Fisher Scientific Inc.'s (TMO - Free Report) fourth-quarter 2023 adjusted earnings per share (EPS) of $5.67 topped the Zacks Consensus Estimate by 0.5%. The figure also rose 5% year over year.
The adjusted number excludes certain non-recurring expenses, including asset amortization costs and certain restructuring costs.
GAAP EPS was $4.20, up 4.6% on a year-over-year basis.
For the full year, adjusted earnings were $21.55 per share, down 7.3% from the year-ago period’s levels. However, the figure beat the Zacks Consensus Estimate by 0.1%.
Revenues in Detail
Revenues in the quarter totaled $10.89 billion, down 4.9% year over year. The top line surpassed the Zacks Consensus Estimate by 1.4%.
Total revenues for 2023 were $42.86 billion, up 4.6% from the year-ago period’s levels. The figure beat the Zacks Consensus Estimate by 0.4%.
Segment Details
Organic revenues in the reported quarter were 7% lower, while Core organic revenues declined 4%.
Thermo Fisher operates under four business segments — Life Sciences Solutions, Analytical Instruments, Specialty Diagnostics and Laboratory Products and Biopharma Services.
Thermo Fisher Scientific Inc. Price, Consensus and EPS Surprise
Revenues in the Life Sciences Solutions segment (22.7% of total revenues) declined 18.9% year over year to $2.47 billion, while Analytical Instruments Segment sales (18.7%) increased 5.2% to $2.04 billion. This figure compares with our model’s projection of $2.07 billion for the Life Sciences Solutions segment and $1.95 billion for the Analytical Instruments Segment for the fourth quarter.
Revenues in the Laboratory Products and Biopharma Services segment (52.5%) fell 7.5% to $5.72 billion. This figure compares with our model’s projection of $6.12 billion for the fourth quarter. The Specialty Diagnostics segment (10.2%) registered a 0.3% year-over-year decline in revenues to $1.10 billion. This figure compares with our model’s projection of $1.14 billion for the fourth quarter.
Margin Analysis
The gross margin of 41.3% in the fourth quarter contracted 5 basis points (bps) year over year.
In the quarter, selling, general and administrative expenses fell 8.9% to $1.67 billion. Research and development expenses declined 16.4% to $327 million.
The adjusted operating margin in the quarter came in at 22.9%, reflecting an improvement of 103 bps.
Financial Position
The company ended 2023 with cash and cash equivalents of $8.08 billion compared with $8.52 billion at the end of 2022.
Cumulative net cash from operating activities was $8.41 billion compared with $9.15 billion a year ago.
Thermo Fisher has a consistent dividend-paying history, with the five-year annualized dividend growth being 15.89%.
During the quarter, Thermo Fisher returned $3.5 billion of capital to shareholders through stock buybacks and dividends.
Guidance
Thermo Fisher provided 2024 guidance.
The company expects 2024 revenues to be in the range of $42.1-$43.3 billion. The Zacks Consensus Estimate for the same is pegged at $42.71 billion.
The adjusted EPS is projected in the band of $20.95 -$22.00. The Zacks Consensus Estimate for the metric is pegged at $21.77 billion.
Our Take
Thermo Fisher exited the fourth quarter of 2023 with better-than-expected results. During the quarter, the company navigated the challenging macroeconomic conditions by leveraging its PPI Business System to deliver strong financial results. The company advanced its proven growth strategy by launching a range of high-impact, innovative new products. Thermo Fisher also launched the Thermo Scientific Meridian EX System and the Thermo Scientific Aquanex Ultrapure Water Purification System during the reported quarter. The company also opened a customer experience center for battery manufacturing in Seoul to support its material science customers as they accelerate the development of the next generation of environment-friendly energy solutions.
However, the year-over-year decline in revenues in Life Science Solutions and Laboratory Products and Biopharma Services looks disappointing. Contraction gross margins look discouraging, too.
Zacks Rank and Key Picks
Thermo Fisher currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks to consider in the broader medical space are Universal Health Services (UHS - Free Report) , Integer Holdings Corporation (ITGR - Free Report) and Acadia Healthcare (ACHC - Free Report) .
Universal Health Services, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 4.4% for 2024. UHS’s earnings surpassed estimates in all the trailing four quarters, delivering an average surprise of 5.47%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
UHS’ shares have inched up 6.5% in the past year compared with the industry’s 11.8% rise.
Integer Holdings, presently carrying a Zacks Rank of 2, has an estimated long-term growth rate of 15.8%. ITGR’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 11.9%.
Integer Holdings’ shares have rallied 54.8% in the past year against the industry’s 3.5% decline.
Acadia Healthcare, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 10.4%. ACHC’s long-term earnings are expected to grow at 11.2%.
Acadia Healthcare’s shares have gained 7.5% in the past six months compared with the industry’s rise of 5.5%.
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Thermo Fisher (TMO) Q4 Earnings Top Estimates, Gross Margin Down
Thermo Fisher Scientific Inc.'s (TMO - Free Report) fourth-quarter 2023 adjusted earnings per share (EPS) of $5.67 topped the Zacks Consensus Estimate by 0.5%. The figure also rose 5% year over year.
The adjusted number excludes certain non-recurring expenses, including asset amortization costs and certain restructuring costs.
GAAP EPS was $4.20, up 4.6% on a year-over-year basis.
For the full year, adjusted earnings were $21.55 per share, down 7.3% from the year-ago period’s levels. However, the figure beat the Zacks Consensus Estimate by 0.1%.
Revenues in Detail
Revenues in the quarter totaled $10.89 billion, down 4.9% year over year. The top line surpassed the Zacks Consensus Estimate by 1.4%.
Total revenues for 2023 were $42.86 billion, up 4.6% from the year-ago period’s levels. The figure beat the Zacks Consensus Estimate by 0.4%.
Segment Details
Organic revenues in the reported quarter were 7% lower, while Core organic revenues declined 4%.
Thermo Fisher operates under four business segments — Life Sciences Solutions, Analytical Instruments, Specialty Diagnostics and Laboratory Products and Biopharma Services.
Thermo Fisher Scientific Inc. Price, Consensus and EPS Surprise
Thermo Fisher Scientific Inc. price-consensus-eps-surprise-chart | Thermo Fisher Scientific Inc. Quote
Revenues in the Life Sciences Solutions segment (22.7% of total revenues) declined 18.9% year over year to $2.47 billion, while Analytical Instruments Segment sales (18.7%) increased 5.2% to $2.04 billion. This figure compares with our model’s projection of $2.07 billion for the Life Sciences Solutions segment and $1.95 billion for the Analytical Instruments Segment for the fourth quarter.
Revenues in the Laboratory Products and Biopharma Services segment (52.5%) fell 7.5% to $5.72 billion. This figure compares with our model’s projection of $6.12 billion for the fourth quarter. The Specialty Diagnostics segment (10.2%) registered a 0.3% year-over-year decline in revenues to $1.10 billion. This figure compares with our model’s projection of $1.14 billion for the fourth quarter.
Margin Analysis
The gross margin of 41.3% in the fourth quarter contracted 5 basis points (bps) year over year.
In the quarter, selling, general and administrative expenses fell 8.9% to $1.67 billion. Research and development expenses declined 16.4% to $327 million.
The adjusted operating margin in the quarter came in at 22.9%, reflecting an improvement of 103 bps.
Financial Position
The company ended 2023 with cash and cash equivalents of $8.08 billion compared with $8.52 billion at the end of 2022.
Cumulative net cash from operating activities was $8.41 billion compared with $9.15 billion a year ago.
Thermo Fisher has a consistent dividend-paying history, with the five-year annualized dividend growth being 15.89%.
During the quarter, Thermo Fisher returned $3.5 billion of capital to shareholders through stock buybacks and dividends.
Guidance
Thermo Fisher provided 2024 guidance.
The company expects 2024 revenues to be in the range of $42.1-$43.3 billion. The Zacks Consensus Estimate for the same is pegged at $42.71 billion.
The adjusted EPS is projected in the band of $20.95 -$22.00. The Zacks Consensus Estimate for the metric is pegged at $21.77 billion.
Our Take
Thermo Fisher exited the fourth quarter of 2023 with better-than-expected results. During the quarter, the company navigated the challenging macroeconomic conditions by leveraging its PPI Business System to deliver strong financial results. The company advanced its proven growth strategy by launching a range of high-impact, innovative new products. Thermo Fisher also launched the Thermo Scientific Meridian EX System and the Thermo Scientific Aquanex Ultrapure Water Purification System during the reported quarter. The company also opened a customer experience center for battery manufacturing in Seoul to support its material science customers as they accelerate the development of the next generation of environment-friendly energy solutions.
However, the year-over-year decline in revenues in Life Science Solutions and Laboratory Products and Biopharma Services looks disappointing. Contraction gross margins look discouraging, too.
Zacks Rank and Key Picks
Thermo Fisher currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks to consider in the broader medical space are Universal Health Services (UHS - Free Report) , Integer Holdings Corporation (ITGR - Free Report) and Acadia Healthcare (ACHC - Free Report) .
Universal Health Services, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 4.4% for 2024. UHS’s earnings surpassed estimates in all the trailing four quarters, delivering an average surprise of 5.47%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
UHS’ shares have inched up 6.5% in the past year compared with the industry’s 11.8% rise.
Integer Holdings, presently carrying a Zacks Rank of 2, has an estimated long-term growth rate of 15.8%. ITGR’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 11.9%.
Integer Holdings’ shares have rallied 54.8% in the past year against the industry’s 3.5% decline.
Acadia Healthcare, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 10.4%. ACHC’s long-term earnings are expected to grow at 11.2%.
Acadia Healthcare’s shares have gained 7.5% in the past six months compared with the industry’s rise of 5.5%.