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Thermo Fisher (TMO) Rides on Pharma & Biotech Amid Pandemic

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On Feb 24, we issued an updated research report on Thermo Fisher Scientific, Inc. (TMO - Free Report) . The company is rapidly boosting its inorganic growth profile. The most recent takeover was that of Brammer Bio. Its strong focus on the emerging markets is also encouraging. The stock has a Zacks Rank #3 (Hold).

ThermoFisher has outperformed its industry in the past six months. The stock has gained 8.6% compared with the industry’s 5% rise.

Thermo Fisher ended the fourth quarter as well as full-year 2020 with better-than-expected numbers. The company delivered an outstanding quarterly performance with organic growth of 51%, leveraging on its capacity to extend support amid the pandemic. COVID-19 response revenues increased to $3.2 billion in the fourth quarter, bringing the full-year contribution to $6.6 billion driven by testing-related products and instruments.

The base business too grew 5% organically, registering another quarter of sequential improvement. Further, for 2020, the company generated $500 million of revenues from COVID-19-related vaccines and therapies support.

In terms of end market, pharma and biotech registered 25% growth in the fourth quarter on robust performance in bioproduction, pharma services, biosciences, and research and safety market channel businesses. In diagnostics and healthcare, the company experienced exceptionally high demand for COVID-19 testing and was able to deliver 200% growth.

Academic and government grew in high single-digits as customers across the globe ramped up activity. The company saw particularly good growth across its chromatography and mass spectrometry businesses. In industrial and applied end market, followinga series of dull quarters, the company returned to growth in the fourth quarter and grew in low single digits.

On the flip side, the COVID-19 headwinds impacted each of its end markets in varying degrees. Overall, the company saw significantly reduced customer activity due to work disruptions.

Thermo Fisher’s industrial and applied end market registered low single-digit growth in the fourth quarter. Customers in this end market were significantly affected by business disruptions due to the pandemic.

Foreign currency fluctuations and competitive landscape are other major downsides.

Key Picks

A few better-ranked stocks from the broader medical space are DENTSPLY SIRONA Inc. (XRAY - Free Report) , Invacare Corporation (IVC - Free Report) and McKesson Corporation (MCK - Free Report) , each carrying a Zacks Rank #2 (Buy). You can seethe complete list of Zacks #1 Rank (Strong Buy) stocks here.

DENTSPLY SIRONAhas a projected long-term earnings growth rate of 54%.

Invacare has a projected long-term earnings growth rate of 57%.

McKesson has an estimated long-term earnings growth rate of 8%.

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