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Thermo Fisher (TMO) Hits a 52-Week High: What's Driving It?
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Thermo Fisher Scientific Inc. (TMO - Free Report) scaled a new 52-week high of $546.05 on Aug 9, before closing the session marginally lower at $541.16.
The company’s shares have charted a solid trajectory in recent times, appreciating 32.9% over the past year versus the 17% growth of the industry it belongs to and 35.5% surge of the S&P 500 composite.
Over the past five years, the company registered earnings growth of 20.7% which is way ahead of the industry’s 4.1% rise and the S&P 500’s 2.8% increase. The company’s long-term expected growth rate of 19.5% exceeds the industry’s growth projection of 17.8% and the S&P 500’s projected 11.2% increase.
At present, Thermo Fisher operates under four business segments: Life Sciences Solutions, Analytical Instruments, Specialty Diagnostics, and Laboratory Products and Services. The company delivered an outstanding quarterly performance with exceptionally strong year-over-year revenue growth across each of its reporting segments. Strong end-market growth was driven by robust fundamentals in life sciences, strong economic activity globally and strong pandemic response. The raised 2021 guidance also buoys optimism.
Image Source: Zacks Investment Research
Let’s delve deeper.
Key Drivers
Q2 Upsides: Thermo Fisher exited the second quarter of 2021 on an extremely bullish note with better-than-expected revenues and earnings. Its second-quarter 2021 earnings beat the Zacks Consensus Estimate by 1.6%. The year-over-year growth across all four operating segments contributed to the top line. Organic growth in base business along with COVID-led initiatives to scale up vaccine production contributed to a strong bottom-line performance. Expansion of operating margin buoys optimism for the stock. The raised 2021 guidance for revenues and adjusted earnings per share is indicative that this growth momentum will continue through the rest of the year.
Strength in End Markets: Market is upbeat about Thermo Fisher’s strong second-quarter performance in all four of its end markets, categorized either by customer type or geography. Pharma and biotech registered more than 30% growth in the quarter driven by strong underlying market conditions. In academic and government, the company grew 35% driven by robust customer activity globally. In industrial and applied, Thermo Fisher grew 30% driven by strong growth across electron microscopy and chromatography and mass spectrometry business. In diagnostics and healthcare, customer demand in base business approached pre-pandemic levels and the company was able to deliver growth in high teens.
Bioproduction Business on the Rise: Thermo Fisher introduced a series of developments, of late, to augment Bioprocessing growth. At present, the company is expanding its bioproduction purification resin capacity, which is used in the mRNA manufacturing process. In the second quarter of 2021, the company delivered exceptionally strong growth in biosciences and bioproduction businesses. We are optimistic about the recent additions to the Biosciences business, including the Invitrogen Bigfoot Spectral Sorter and the Invitrogen Attune CytPix Flow Cytometer to advance cell analysis.
Strong Solvency: Thermo Fisher is well capitalized, having exited the second quarter of 2021 with cash and cash equivalents of $7.02 billion compared with $5.58 billion in the first quarter of 2021. The company finished the quarter with approximately $18.78 billion of total debt. Although the second quarter’s total debt was much higher than the corresponding cash and cash equivalent level, no short-term payable debt on its balance sheet is good news in terms of the company’s solvency position, particularly during a pandemic.
Downsides
Exposure to Foreign Currency: Thermo Fisher is exposed to fluctuations in foreign currency since it derives more than 50% of its revenues from the international market. In the past several years, the company’s earnings were affected significantly on headwind from foreign exchange.
Tough Competitive Pressure: Thermo Fisher faces significant competition from a broad range of manufacturers and third-party distributors, on account of its diversified portfolio. The competitive landscape is quite tough with changing technology and customer demands that require continuing research and development.
Zacks Rank and Key Picks
Currently, Thermo Fisher carries a Zacks Rank #3 (Hold).
Image: Shutterstock
Thermo Fisher (TMO) Hits a 52-Week High: What's Driving It?
Thermo Fisher Scientific Inc. (TMO - Free Report) scaled a new 52-week high of $546.05 on Aug 9, before closing the session marginally lower at $541.16.
The company’s shares have charted a solid trajectory in recent times, appreciating 32.9% over the past year versus the 17% growth of the industry it belongs to and 35.5% surge of the S&P 500 composite.
Over the past five years, the company registered earnings growth of 20.7% which is way ahead of the industry’s 4.1% rise and the S&P 500’s 2.8% increase. The company’s long-term expected growth rate of 19.5% exceeds the industry’s growth projection of 17.8% and the S&P 500’s projected 11.2% increase.
At present, Thermo Fisher operates under four business segments: Life Sciences Solutions, Analytical Instruments, Specialty Diagnostics, and Laboratory Products and Services. The company delivered an outstanding quarterly performance with exceptionally strong year-over-year revenue growth across each of its reporting segments. Strong end-market growth was driven by robust fundamentals in life sciences, strong economic activity globally and strong pandemic response. The raised 2021 guidance also buoys optimism.
Image Source: Zacks Investment Research
Let’s delve deeper.
Key Drivers
Q2 Upsides: Thermo Fisher exited the second quarter of 2021 on an extremely bullish note with better-than-expected revenues and earnings. Its second-quarter 2021 earnings beat the Zacks Consensus Estimate by 1.6%. The year-over-year growth across all four operating segments contributed to the top line. Organic growth in base business along with COVID-led initiatives to scale up vaccine production contributed to a strong bottom-line performance. Expansion of operating margin buoys optimism for the stock. The raised 2021 guidance for revenues and adjusted earnings per share is indicative that this growth momentum will continue through the rest of the year.
Strength in End Markets: Market is upbeat about Thermo Fisher’s strong second-quarter performance in all four of its end markets, categorized either by customer type or geography. Pharma and biotech registered more than 30% growth in the quarter driven by strong underlying market conditions. In academic and government, the company grew 35% driven by robust customer activity globally. In industrial and applied, Thermo Fisher grew 30% driven by strong growth across electron microscopy and chromatography and mass spectrometry business. In diagnostics and healthcare, customer demand in base business approached pre-pandemic levels and the company was able to deliver growth in high teens.
Bioproduction Business on the Rise: Thermo Fisher introduced a series of developments, of late, to augment Bioprocessing growth. At present, the company is expanding its bioproduction purification resin capacity, which is used in the mRNA manufacturing process. In the second quarter of 2021, the company delivered exceptionally strong growth in biosciences and bioproduction businesses. We are optimistic about the recent additions to the Biosciences business, including the Invitrogen Bigfoot Spectral Sorter and the Invitrogen Attune CytPix Flow Cytometer to advance cell analysis.
Strong Solvency: Thermo Fisher is well capitalized, having exited the second quarter of 2021 with cash and cash equivalents of $7.02 billion compared with $5.58 billion in the first quarter of 2021. The company finished the quarter with approximately $18.78 billion of total debt. Although the second quarter’s total debt was much higher than the corresponding cash and cash equivalent level, no short-term payable debt on its balance sheet is good news in terms of the company’s solvency position, particularly during a pandemic.
Downsides
Exposure to Foreign Currency: Thermo Fisher is exposed to fluctuations in foreign currency since it derives more than 50% of its revenues from the international market. In the past several years, the company’s earnings were affected significantly on headwind from foreign exchange.
Tough Competitive Pressure: Thermo Fisher faces significant competition from a broad range of manufacturers and third-party distributors, on account of its diversified portfolio. The competitive landscape is quite tough with changing technology and customer demands that require continuing research and development.
Zacks Rank and Key Picks
Currently, Thermo Fisher carries a Zacks Rank #3 (Hold).
A few better-ranked stocks from the Medical-Instruments industry include IDEXX Laboratories, Inc. (IDXX - Free Report) , Intuitive Surgical, Inc. (ISRG - Free Report) and Semler Scientific Inc. , each sporting a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
IDEXX has a long-term earnings growth rate of 19.9%.
Intuitive Surgical has a long-term earnings growth rate of 9.7%.
Semler Scientific has a long-term earnings growth rate of 25%.