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8 Factors That Make Thermo Fisher a Valuable Pick Right Now
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Underlying strength and earnings growth prospects make Thermo Fisher Scientific Inc. (TMO - Free Report) a solid bet now. The factors that might drive the stock higher include an impressive organic growth as well as growth through acquisitions and solid balance sheet position.
The company has an impressive earnings surprise history, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters on average of 2.3%.
It has also been successful in gaining analysts’ confidence with seven analysts revising their current-year earnings estimates upward over the past 60 days. Estimates rose around 1.1% to $9.33 per share, justifying the stock’s Zacks Rank #2 (Buy).
Shares of Thermo Fisher have gained 7.4% over the past three months compared with the industry’s 1.7% gain.
What’s Acting in Favor of the Stock?
Revenue Strength: The company has been witnessing a consistent improvement in revenues. For the last five years, total revenues saw a CAGR of 9.9%.
Its projected revenue growth rate is pegged at 8.3% for 2017, compared with the industry average of 6.8%.
Steady Addition of Capacities: The company has been steadily adding capacities and enhancing existing ones through acquisitions. In this regard, the acquisition of FEI, which has already started generating synergies and contributing largely to the company’s analytical instruments portfolio, has in turn boosted market optimism about the stock. Moreover, we are looking forward to the company’s latest Patheon buyout through which Thermo Fisher forayed into the high-potential contract development and manufacturing organization (CDMO) space.
Solid Prospects in High-Potential Emerging Markets: The Massachusetts -based, medical instruments manufacturer plans to continue to strengthen its foothold in emerging markets, such as China and India, and to translate this success to other high-priority opportunities in regions such as South Korea, Russia and Brazil. In the second quarter of 2017, the company recorded solid contributions from China, India and the Middle East. We are also upbeat about the company recently opening a Center of Excellence for electron microscopy in Saudi Arabia.
Earnings per Share Growth: Thermo Fisher has recorded an earnings growth rate of 14.2% over the last three to five years compared with 5.8% for the S&P 500 index.
Further, this earnings momentum is likely to continue in the long term (three to five years) as reflected by the company’s projected earnings per share growth rate of 11.7% compared with 9.9% for the S&P 500 index.
Superior Return on Equity: Thermo Fisher has a return on equity of 15.2% compared with the industry average of 0.2%. This indicates that the company is efficient in utilizing shareholders’ funds.
Strong Cash Position: Thermo Fisher exited the last reported second quarter of 2017 with cash and cash equivalents of $611.0 million. Moreover, the company recorded year-to-date net cash from operating activities of $1.21 billion. We believe the company’s strong cash balance enables it to carry on with the strategy of inorganic expansion.
Effective Capital Deployment: The company has been actively returning capital to shareholders. In this regard, during the last reported second quarter, the company completed $250 million worth of share buybacks and paid $60 million in dividends. As of Aug 4, 2017, the company had $500 million available for future repurchases under existing share repurchase policy.
Raised Guidance Buoys Optimism: Backed by a solid second-quarter performance and a less adverse foreign exchange environment forecast, Thermo Fisher raised its full-year 2017 guidance. The raised guidance is suggestive of brighter prospects.
Edwards Lifesciences has a long-term expected earnings growth rate of 15.2%. The stock has rallied roughly 25.4% over the last six months.
Lantheus Holdings has a long-term expected earnings growth rate of 12.5%. The stock has gained 25.7% over the last six months.
Chemed has a long-term expected earnings growth rate of 10%. The stock has gained around 8.9% over the last six months.
One Simple Trading Idea
Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.
This proven stock-picking system is grounded on a single big idea that can be fortune shaping and life changing. You can apply it to your portfolio starting today.
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8 Factors That Make Thermo Fisher a Valuable Pick Right Now
Underlying strength and earnings growth prospects make Thermo Fisher Scientific Inc. (TMO - Free Report) a solid bet now. The factors that might drive the stock higher include an impressive organic growth as well as growth through acquisitions and solid balance sheet position.
The company has an impressive earnings surprise history, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters on average of 2.3%.
It has also been successful in gaining analysts’ confidence with seven analysts revising their current-year earnings estimates upward over the past 60 days. Estimates rose around 1.1% to $9.33 per share, justifying the stock’s Zacks Rank #2 (Buy).
Shares of Thermo Fisher have gained 7.4% over the past three months compared with the industry’s 1.7% gain.
What’s Acting in Favor of the Stock?
Revenue Strength: The company has been witnessing a consistent improvement in revenues. For the last five years, total revenues saw a CAGR of 9.9%.
Its projected revenue growth rate is pegged at 8.3% for 2017, compared with the industry average of 6.8%.
Steady Addition of Capacities: The company has been steadily adding capacities and enhancing existing ones through acquisitions. In this regard, the acquisition of FEI, which has already started generating synergies and contributing largely to the company’s analytical instruments portfolio, has in turn boosted market optimism about the stock. Moreover, we are looking forward to the company’s latest Patheon buyout through which Thermo Fisher forayed into the high-potential contract development and manufacturing organization (CDMO) space.
Solid Prospects in High-Potential Emerging Markets: The Massachusetts -based, medical instruments manufacturer plans to continue to strengthen its foothold in emerging markets, such as China and India, and to translate this success to other high-priority opportunities in regions such as South Korea, Russia and Brazil. In the second quarter of 2017, the company recorded solid contributions from China, India and the Middle East. We are also upbeat about the company recently opening a Center of Excellence for electron microscopy in Saudi Arabia.
Earnings per Share Growth: Thermo Fisher has recorded an earnings growth rate of 14.2% over the last three to five years compared with 5.8% for the S&P 500 index.
Further, this earnings momentum is likely to continue in the long term (three to five years) as reflected by the company’s projected earnings per share growth rate of 11.7% compared with 9.9% for the S&P 500 index.
Superior Return on Equity: Thermo Fisher has a return on equity of 15.2% compared with the industry average of 0.2%. This indicates that the company is efficient in utilizing shareholders’ funds.
Strong Cash Position: Thermo Fisher exited the last reported second quarter of 2017 with cash and cash equivalents of $611.0 million. Moreover, the company recorded year-to-date net cash from operating activities of $1.21 billion. We believe the company’s strong cash balance enables it to carry on with the strategy of inorganic expansion.
Effective Capital Deployment: The company has been actively returning capital to shareholders. In this regard, during the last reported second quarter, the company completed $250 million worth of share buybacks and paid $60 million in dividends. As of Aug 4, 2017, the company had $500 million available for future repurchases under existing share repurchase policy.
Raised Guidance Buoys Optimism: Backed by a solid second-quarter performance and a less adverse foreign exchange environment forecast, Thermo Fisher raised its full-year 2017 guidance. The raised guidance is suggestive of brighter prospects.
Other Key Picks
A few other top-ranked medical stocks are Edwards Lifesciences Corporation (EW - Free Report) , Lantheus Holdings, Inc. (LNTH - Free Report) and Chemed Corporation (CHE - Free Report) . Edwards Lifesciences sports a Zacks Rank #1 (Strong Buy), while Lantheus Holdings and Chemed carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Edwards Lifesciences has a long-term expected earnings growth rate of 15.2%. The stock has rallied roughly 25.4% over the last six months.
Lantheus Holdings has a long-term expected earnings growth rate of 12.5%. The stock has gained 25.7% over the last six months.
Chemed has a long-term expected earnings growth rate of 10%. The stock has gained around 8.9% over the last six months.
One Simple Trading Idea
Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.
This proven stock-picking system is grounded on a single big idea that can be fortune shaping and life changing. You can apply it to your portfolio starting today.
Learn more >>