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Thermo Fisher (TMO) Gains on Latest Buyouts Despite Cost Woes

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On May 16, we issued an updated research report on Thermo Fisher Scientific, Inc. (TMO - Free Report) . Banking on several takeovers including Patheon and FEI acquisitions, this leading scientific instrument maker is rapidly ramping up its inorganic growth profile. The company’s strong focus on the emerging markets is also encouraging. The stock has a Zacks Rank #3 (Hold).

Thermo Fisher ended the first quarter on a promising note with adjusted earnings and revenues surpassing the Zacks Consensus Estimate. We are also impressed by the company’s solid international performance on the back of strong growth in the emerging markets of China, South Korea and India.

 

Also, a series of product launches along with major progress in precision medicine initiatives aided Thermo Fisher’s performance. Moreover, the Patheon buyout has substantially added an impetus to the company’s value proposition for biopharma customers. Notably, the integration has already started to prove accretive to Thermo Fisher’s Laboratory Products and Services segment.

Over the past year, Thermo Fisher has successfully outperformed its industry. The stock has rallied 27.7% versus the industry’s 4.9% decline. The promising 2018 guidance also uplifts the mood to indicate the stock’s continuous bull run throughout the remainder of the year.

On the flip side, the company’s business segments have been impacted by an unfavorable business mix over the past few quarters. Also, competitive headwinds and rising operating costs persistently pose a threat. This apart, Thermo Fisher derives majority of its revenues from the international market, which exposes it to currency volatility.

Zacks Ranks & Other Key Picks

Thermo Fisher currently carries a Zacks Rank #2 (Buy). Some other top-ranked stocks in the broader medical space are ABIOMED, Inc. , Genomic Health, Inc. and Varian Medical Systems, Inc. .

ABIOMED has a long-term growth rate of 27%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Genomic Health has an expected growth rate of 187.5% and a Zacks Rank of 1.

Varian Medical has a projected long-term growth rate of 8%. The stock holds a Zacks Rank of 2.

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