Massachusetts-based medical instruments manufacturer, Thermo Fisher Scientific, Inc. (TMO - Free Report) is scheduled to report its second-quarter 2016 results before the opening bell on Jul 28. Last quarter, the company had posted a positive earnings surprise of 3.45%. The four-quarter trailing average beat is pegged at 1.96%. Let’s see how things are shaping up prior to this announcement.
Factors at Play
After a solid start, Thermo Fisher is looking forward to continue this momentum for the rest of 2016 as well. However, while it is encouraging to note that the company still expects 4% organic growth for the full-year 2016, we are apprehensive as the tough organic growth comp expected in the second quarter may drag the overall result down.
However, in bioproduction and biosciences businesses, we anticipate a strong and consistent growth even in the second-quarter 2016. Strong productivity and incremental cost synergies are projected to further improve operational efficiencies down the line.
We currently await the integration and expected synergy of Affimetrix, the recently completed mega acquisition by Thermo Fisher, which is expected to enhance its offering in the fast-growing flow cytometry market through an advanced antibody portfolio. This should be evident from the second quarter itself.
With respect to Life Technologies synergy, per the company, it is on track to deliver revenue and cost synergy targets. By the end of 2015, the company realized $130 million of incremental cost synergies, in line with its full-year target. Revenue synergies at 2015 end were $90 million, much faster than anticipated. This puts Thermo Fisher in a comfortable position to achieve its full-year 2016 targeted synergy of delivering $150 million in revenue.
Apart from the Life Technologies integration, we are also focusing on the company’s growth strategies in emerging markets. The company expects to garner 25% of total revenue from the high-growth Asia-Pacific and emerging markets by 2016 from 19% in 2011 (10% in 2006). Thermo Fisher’s expanding presence in emerging markets will continue to be an key catalyst for growth in the second quarter.
Earnings Whispers
Our proven model does not conclusively show that Thermo Fisher is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Thermo Fisher’s Earnings ESP is 0.00%, since both the Most Accurate estimate and the Zacks Consensus Estimate stand at $2.00.
Zacks Rank: Thermo Fisher has a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, a breakeven ESP makes surprise prediction difficult.
Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are three companies you may want to consider as our proven model shows they have the right combination of elements to post an earnings beat this quarter:
Bristol-Myers Squibb Company (BMY) has an Earnings ESP of +3.03% and a Zacks Rank #1.
Teligent Inc. (TLGT - Free Report) has an Earnings ESP of +100% and a Zacks Rank #2.
GW Pharmaceuticals plc has an Earnings ESP of +6.36% and a Zacks Rank #2.
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It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
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Massachusetts-based medical instruments manufacturer, Thermo Fisher Scientific, Inc. (TMO - Free Report) is scheduled to report its second-quarter 2016 results before the opening bell on Jul 28. Last quarter, the company had posted a positive earnings surprise of 3.45%. The four-quarter trailing average beat is pegged at 1.96%. Let’s see how things are shaping up prior to this announcement.
Factors at Play
After a solid start, Thermo Fisher is looking forward to continue this momentum for the rest of 2016 as well. However, while it is encouraging to note that the company still expects 4% organic growth for the full-year 2016, we are apprehensive as the tough organic growth comp expected in the second quarter may drag the overall result down.
However, in bioproduction and biosciences businesses, we anticipate a strong and consistent growth even in the second-quarter 2016. Strong productivity and incremental cost synergies are projected to further improve operational efficiencies down the line.
We currently await the integration and expected synergy of Affimetrix, the recently completed mega acquisition by Thermo Fisher, which is expected to enhance its offering in the fast-growing flow cytometry market through an advanced antibody portfolio. This should be evident from the second quarter itself.
With respect to Life Technologies synergy, per the company, it is on track to deliver revenue and cost synergy targets. By the end of 2015, the company realized $130 million of incremental cost synergies, in line with its full-year target. Revenue synergies at 2015 end were $90 million, much faster than anticipated. This puts Thermo Fisher in a comfortable position to achieve its full-year 2016 targeted synergy of delivering $150 million in revenue.
Apart from the Life Technologies integration, we are also focusing on the company’s growth strategies in emerging markets. The company expects to garner 25% of total revenue from the high-growth Asia-Pacific and emerging markets by 2016 from 19% in 2011 (10% in 2006). Thermo Fisher’s expanding presence in emerging markets will continue to be an key catalyst for growth in the second quarter.
Earnings Whispers
Our proven model does not conclusively show that Thermo Fisher is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Thermo Fisher’s Earnings ESP is 0.00%, since both the Most Accurate estimate and the Zacks Consensus Estimate stand at $2.00.
Zacks Rank: Thermo Fisher has a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, a breakeven ESP makes surprise prediction difficult.
Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are three companies you may want to consider as our proven model shows they have the right combination of elements to post an earnings beat this quarter:
Bristol-Myers Squibb Company (BMY) has an Earnings ESP of +3.03% and a Zacks Rank #1.
Teligent Inc. (TLGT - Free Report) has an Earnings ESP of +100% and a Zacks Rank #2.
GW Pharmaceuticals plc has an Earnings ESP of +6.36% and a Zacks Rank #2.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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