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Thermo Fisher's (TMO) New Buyouts Aid, Cost Pressure Ails
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Thermo Fisher Scientific, Inc. (TMO - Free Report) is rapidly boosting its inorganic growth profile through strategic acquisitions. Its strong focus on emerging markets is also encouraging. Yet, competitive headwinds and currency fluctuations continue to pose a threat. The stock has a Zacks Rank #3 (Hold).
Thermo Fisher has outperformed its industry in the past year. The stock has risen 29% against the industry’s 0.6% fall.
Thermo Fisher’s fourth-quarter results were better than expected. The company delivered 8% organic growth in the base business, ahead of its expectations. The robust year-over-year revenue growth across the Analytical Instruments and the Laboratory Products and Biopharma Services segments appears promising. The company’s strategic acquisitions of PPD, Inc. and PeproTech raise investors’ confidence. For the reported quarter, the company recognized $375 million of revenues for PPD in its newly-formed clinical research business.
In the quarter, Thermo Fisher generated $2.45 billion in COVID-response-related revenues. In October 2021, Thermo Fisher introduced the MagMAX Wastewater Ultra Nucleic Acid Isolation Kit to combat the spread of COVID-19. In December 2021, the company updated the Applied Biosystems TaqMan SARS-CoV-2 Mutation Panel to allow the direct detection of the highly contagious Omicron SARS-CoV-2 variant.
The company’s high degree of response to the pandemic has enabled it to accelerate its growth strategy, strengthen customer relationships, and bump up investments, which encouraged it to raise the 2022 core organic growth guidance to 8%.
The company also witnessed strength across the majority of its end markets. In addition, the company’s accelerated investments to expand bioproduction capacity buoy optimism. The upbeat revenue and earnings guidance for 2022 is indicative that this strong growth momentum will continue.
On the flip side, Thermo Fisher saw a year-over-year decline in fourth-quarter earnings, raising apprehension. The gross margin of 50.5% contracted 341 basis points (bps) year over year. In the quarter, the company’s selling, general and administrative expenses increased 9.2%, whereas research and development expenses rose 4.3%. These escalating expenses led to a 481 bps contraction in adjusted operating margin, building significant pressure on the bottom line.
Thermo Fisher’s fourth-quarter 2021 diagnostics and healthcare end-market revenues declined 30%. The company also witnessed a 4.9% and 26.4% decline in revenues across the Life Sciences Solutions and the Specialty Diagnostics segments, respectively.
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.
Foreign currency fluctuations and competitive landscape are the other major downsides.
Key Picks
Some better-ranked stocks in the broader medical space are McKesson Corporation (MCK - Free Report) , AMN Healthcare Services, Inc. (AMN - Free Report) and Bio-Rad Laboratories, Inc. (BIO - Free Report) .
McKesson has a long-term earnings growth rate of 11.8%. MCK has gained 49.7% compared with the industry’s 4.7% growth in the past year.
AMN Healthcare, sporting a Zacks Rank #1, has a long-term earnings growth rate of 16.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 19.5%, on average.
AMN Healthcare has outperformed its industry in the past year. AMN has gained 23.8% versus the 62% industry decline.
Bio-Rad reported fourth-quarter 2021 adjusted EPS of $3.21, which surpassed the Zacks Consensus Estimate by 11.9%. It currently has a Zacks Rank #2.
Bio-Rad has an earnings yield of 2.3% versus the industry’s negative yield. BIO surpassed earnings estimates in the trailing four quarters, the average surprise being 66.9%.
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Thermo Fisher's (TMO) New Buyouts Aid, Cost Pressure Ails
Thermo Fisher Scientific, Inc. (TMO - Free Report) is rapidly boosting its inorganic growth profile through strategic acquisitions. Its strong focus on emerging markets is also encouraging. Yet, competitive headwinds and currency fluctuations continue to pose a threat. The stock has a Zacks Rank #3 (Hold).
Thermo Fisher has outperformed its industry in the past year. The stock has risen 29% against the industry’s 0.6% fall.
Thermo Fisher’s fourth-quarter results were better than expected. The company delivered 8% organic growth in the base business, ahead of its expectations. The robust year-over-year revenue growth across the Analytical Instruments and the Laboratory Products and Biopharma Services segments appears promising. The company’s strategic acquisitions of PPD, Inc. and PeproTech raise investors’ confidence. For the reported quarter, the company recognized $375 million of revenues for PPD in its newly-formed clinical research business.
In the quarter, Thermo Fisher generated $2.45 billion in COVID-response-related revenues. In October 2021, Thermo Fisher introduced the MagMAX Wastewater Ultra Nucleic Acid Isolation Kit to combat the spread of COVID-19. In December 2021, the company updated the Applied Biosystems TaqMan SARS-CoV-2 Mutation Panel to allow the direct detection of the highly contagious Omicron SARS-CoV-2 variant.
The company’s high degree of response to the pandemic has enabled it to accelerate its growth strategy, strengthen customer relationships, and bump up investments, which encouraged it to raise the 2022 core organic growth guidance to 8%.
The company also witnessed strength across the majority of its end markets. In addition, the company’s accelerated investments to expand bioproduction capacity buoy optimism. The upbeat revenue and earnings guidance for 2022 is indicative that this strong growth momentum will continue.
Thermo Fisher Scientific Inc. Price
Thermo Fisher Scientific Inc. price | Thermo Fisher Scientific Inc. Quote
On the flip side, Thermo Fisher saw a year-over-year decline in fourth-quarter earnings, raising apprehension. The gross margin of 50.5% contracted 341 basis points (bps) year over year. In the quarter, the company’s selling, general and administrative expenses increased 9.2%, whereas research and development expenses rose 4.3%. These escalating expenses led to a 481 bps contraction in adjusted operating margin, building significant pressure on the bottom line.
Thermo Fisher’s fourth-quarter 2021 diagnostics and healthcare end-market revenues declined 30%. The company also witnessed a 4.9% and 26.4% decline in revenues across the Life Sciences Solutions and the Specialty Diagnostics segments, respectively.
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.
Foreign currency fluctuations and competitive landscape are the other major downsides.
Key Picks
Some better-ranked stocks in the broader medical space are McKesson Corporation (MCK - Free Report) , AMN Healthcare Services, Inc. (AMN - Free Report) and Bio-Rad Laboratories, Inc. (BIO - Free Report) .
McKesson, carrying a Zacks Rank #2 (Buy), reported third-quarter fiscal 2022 adjusted earnings per share (EPS) of $6.15, which beat the Zacks Consensus Estimate of $5.38 by 14.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
McKesson has a long-term earnings growth rate of 11.8%. MCK has gained 49.7% compared with the industry’s 4.7% growth in the past year.
AMN Healthcare, sporting a Zacks Rank #1, has a long-term earnings growth rate of 16.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 19.5%, on average.
AMN Healthcare has outperformed its industry in the past year. AMN has gained 23.8% versus the 62% industry decline.
Bio-Rad reported fourth-quarter 2021 adjusted EPS of $3.21, which surpassed the Zacks Consensus Estimate by 11.9%. It currently has a Zacks Rank #2.
Bio-Rad has an earnings yield of 2.3% versus the industry’s negative yield. BIO surpassed earnings estimates in the trailing four quarters, the average surprise being 66.9%.