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Thermo Fisher (TMO) Beats on Q2 Earnings, Raises 2021 View

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Thermo Fisher Scientific Inc.'s (TMO - Free Report) second-quarter 2021 adjusted earnings per share of $5.60 beat the Zacks Consensus Estimate by 1.6%. The figure surged 43.9% year over year. The adjusted number excludes certain non-recurring expenses including asset amortization and restructuring costs.

GAAP earnings per share were $4.61, a 58.9% surge on a year-over-year basis.

The company’s organic growth in base business along with COVID-19 led initiatives to scale up vaccine production contributed to a strong bottom-line performance.

Revenues in the quarter under review grossed $9.27 billion, up 34% year over year. The top line exceeded the Zacks Consensus Estimate by 5.9%.

Quarter in Detail

Organic revenues in the reported quarter grew 28% year over year. While acquisitions contributed 2% to the top line, favorable currency translation increased revenues by 5%. Organic revenue growth from the base business was 27% in the reported quarter.

Thermo Fisher operates under four business segments: Life Sciences Solutions, Analytical Instruments, Specialty Diagnostics, and Laboratory Products and Services.

Revenues at the Life Sciences Solutions segment (38.4% of total revenues) improved 37% year over year to $3.56 billion while Analytical Instruments Segment sales (16%) rose 41% to $1.48 billion.

Revenues at the Laboratory Products and Services segment (38.6%) rose 29% to $3.58 billion. The Specialty Diagnostics segment (13.3%) recorded 25% year-over-year rise in revenues to $1.24 billion.

Gross margin of 50.6% in the second quarter contracted 6 basis points (bps) year over year on 34.2% rise in cost of revenues. In the quarter, selling, general and administrative expenses increased 13.9% to $1.61 billion. Research and development expenses were $343 million, up 29.9% year over year. Adjusted operating margin for the quarter came in at 29.5%, reflecting an expansion of 315 bps.

The company exited the second quarter with cash and cash equivalents of $7.02 billion compared with $5.58 billion at the end of the first quarter. Cumulative net cash provided by operating activities at the end of the second quarter was $4.21 billion compared with $2.24 billion a year ago.

Guidance

The company has raised its revenue guidance for 2021 to $35.90 billion, indicating 11% reported growth over 2020 (earlier guidance was $35.6 billion, implying 10% reported growth expectation). Full-year adjusted EPS guidance has been raised to $22.07, indicating 13% growth over 2020 (previous guidance was $21.97, representing 12% year over year growth). The current Zacks Consensus Estimate for adjusted earnings and revenues is pegged at $22.01 and $35.60 billion, respectively.

Our Take

Thermo Fisher ended the second quarter of 2021 with better-than-expected numbers. The company delivered a strong quarterly performance, leveraging on significant rebound in its base business.

We are encouraged about the strong year-over-year revenue growth across each of its reporting segments. Operating margin expansion in the second quarter was encouraging. The raised 2021 guidance too buoys optimism.

On the flip side, in the quarter,COVID-19 response revenues were $1.9 billion, a significant reduction from the prior quarter’s figure of $2.9 billion. We believe the national-wide slowdown in COVID-19 testing demand through the months of the second quarter resulted in such a drastic fall.

Zacks Rank and Key Picks

Thermo Fisher currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from trhe same space include AMN Healthcare Services Inc (AMN - Free Report) , Catalent, Inc. (CTLT - Free Report) and Globus Medical, Inc. (GMED - Free Report) , each sporting a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

The Zacks Consensus Estimate for AMN Healthcare’s second-quarter 2021 adjusted EPS is currently pegged at $1.47. The consensus estimate for second-quarter revenues is pegged at $829.4 million.

The Zacks Consensus Estimate for Catalent’s fourth-quarter fiscal 2021 adjusted EPS is currently pegged at $1.04. The consensus estimate for fourth-quarter revenues is pegged at $1.13 billion.

For Globus Medical, the Zacks Consensus Estimate for second-quarter 2021 adjusted EPS is currently pegged at 45 cents. The consensus estimate for its revenues stands at $226.96 million.