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Here's Why You Should Retain Thermo Fisher (TMO) Stock Now
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Thermo Fisher Scientific Inc. (TMO - Free Report) has been gaining from strength across its end markets. The company’s continued efforts to strengthen its bioproduction business buoy optimism. The upbeat sales expectations from the newly-acquired PPD business also raise investors’ confidence. However, unfavorable foreign currency fluctuations and stiff rivalry raise apprehension.
In the past year, this Zacks Rank #3 (Hold) stock has gained 3.3% against a 26.5% fall of the industry and a 12.9% drop of the S&P 500 composite.
The renowned medical and laboratory equipment provider has a market capitalization of $207.84 billion. Its earnings surpassed estimates in the trailing four quarters, the average surprise being 16.9%.
In the past five years, the company’s earnings grew 24.2%, way ahead of the industry’s 10.4% rise and the S&P 500’s 13.4% increase. The company’s long-term expected growth rate of 13% for earnings compares with the industry’s long-term growth expectation of 15.1% and the S&P 500’s estimated 11.2% rise.
Image Source: Zacks Investment Research
Let’s delve deeper.
Factors at Play
Strength in End Markets: Thermo Fisher witnessed strength in three of its four end markets in first-quarter 2022. Within the pharma and biotech end market, the company delivered growth in the mid-teens on broad-based strength in this end market. In academics and government, the company grew in the mid-single digits, with good growth in biosciences, electron microscopy and the research and safety market channel.
Meanwhile, within industrial and applied, Thermo Fisher grew in the mid-teens on strong growth in all of its analytical instrument businesses, including electron microscopy, chromatography, mass spectrometry and chemical analysis and the research and safety market channel.
Bioproduction Business on the Rise: Thermo Fisher is expanding its bioproduction purification resin capacity, which is used in the mRNA manufacturing process. The company opened new manufacturing sites in China and Singapore to address biopharma customers’ local and global demand from biopharma customers. The company also entered a 15-year strategic collaboration agreement with Moderna to establish large-scale U.S. manufacturing of mRNA-based vaccines and therapies.
Last year, the company launched a high-performer DynaDrive Single-Use Bioreactor within the bioproduction business.
PPD Acquisition Seems Strategic: In December 2021, Thermo Fisher completed its colossal $17.4-billion acquisition of PPD, Inc. Per management, the addition of PPD's leading clinical research services expands the company’s value proposition for its biotech and pharmaceutical customers, strengthening its work in bringing life-changing therapies to market that benefit patients worldwide. The acquisition is anticipated to expand Thermo Fishers’ global reach in the attractive, high-growth clinical research services industry.
This business is expected to deliver $6.7 billion in 2022 in revenue, which indicates 11% core organic growth on a full-year basis, up three percentage points from the company’s previous guidance.
Downsides
Weak Margins: Thermo Fisher’s gross margin of 47.4% in the first quarter contracted 657 basis points (bps) year over year. Meanwhile, the adjusted operating margin for the quarter came in at 28.9%, reflecting a contraction of 613 bps.
Exposure to Foreign Currency: Thermo Fisher derives more than 50% of its revenues from the international market, which exposes it to fluctuations in foreign currency. In the past several years, the company’s earnings were affected significantly by a headwind from foreign exchange.
Tough Competition: On account of its diversified portfolio, Thermo Fisher faces different types of competitors, including a broad range of manufacturers and third-party distributors. The competitive landscape is quite tough with changing technology and customer demands that require consistent research and development.
Estimate Trend
Over the past 90 days, the Zacks Consensus Estimate for Thermo Fisher’s 2022 earnings has moved 0.8% north to $22.70.
The Zacks Consensus Estimate for its 2022 revenues is pegged at $42.49 billion, suggesting an 8.4% rise from the 2021 reported figure.
Key Picks
A few better-ranked stocks in the broader medical space that investors can consider are AMN Healthcare Services, Inc. (AMN - Free Report) , Merck & Co., Inc. (MRK - Free Report) and Patterson Companies, Inc. (PDCO - Free Report) .
AMN Healthcare has a long-term earnings growth rate of 1.1%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.6%, on average. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare has outperformed its industry in the past year. AMN has gained 14.4% against the industry’s 34% fall.
Merck has a long-term earnings growth rate of 10.1%. The company surpassed earnings estimates in the trailing three quarters and missed in one, delivering a surprise of 13.4%, on average. It currently carries a Zacks Rank #2 (Buy).
Merck has outperformed its industry in the past year. MRK has gained 20.6% against the industry’s 14.7% growth.
Patterson Companies has an estimated long-term growth rate of 9.6%. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 16.5%. It currently flaunts a Zacks Rank #2.
Patterson Companies has outperformed its industry in the past year. PDCO has lost 1.1% compared with the industry’s 13% fall in the past year.
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Here's Why You Should Retain Thermo Fisher (TMO) Stock Now
Thermo Fisher Scientific Inc. (TMO - Free Report) has been gaining from strength across its end markets. The company’s continued efforts to strengthen its bioproduction business buoy optimism. The upbeat sales expectations from the newly-acquired PPD business also raise investors’ confidence. However, unfavorable foreign currency fluctuations and stiff rivalry raise apprehension.
In the past year, this Zacks Rank #3 (Hold) stock has gained 3.3% against a 26.5% fall of the industry and a 12.9% drop of the S&P 500 composite.
The renowned medical and laboratory equipment provider has a market capitalization of $207.84 billion. Its earnings surpassed estimates in the trailing four quarters, the average surprise being 16.9%.
In the past five years, the company’s earnings grew 24.2%, way ahead of the industry’s 10.4% rise and the S&P 500’s 13.4% increase. The company’s long-term expected growth rate of 13% for earnings compares with the industry’s long-term growth expectation of 15.1% and the S&P 500’s estimated 11.2% rise.
Image Source: Zacks Investment Research
Let’s delve deeper.
Factors at Play
Strength in End Markets: Thermo Fisher witnessed strength in three of its four end markets in first-quarter 2022. Within the pharma and biotech end market, the company delivered growth in the mid-teens on broad-based strength in this end market. In academics and government, the company grew in the mid-single digits, with good growth in biosciences, electron microscopy and the research and safety market channel.
Meanwhile, within industrial and applied, Thermo Fisher grew in the mid-teens on strong growth in all of its analytical instrument businesses, including electron microscopy, chromatography, mass spectrometry and chemical analysis and the research and safety market channel.
Bioproduction Business on the Rise: Thermo Fisher is expanding its bioproduction purification resin capacity, which is used in the mRNA manufacturing process. The company opened new manufacturing sites in China and Singapore to address biopharma customers’ local and global demand from biopharma customers. The company also entered a 15-year strategic collaboration agreement with Moderna to establish large-scale U.S. manufacturing of mRNA-based vaccines and therapies.
Last year, the company launched a high-performer DynaDrive Single-Use Bioreactor within the bioproduction business.
PPD Acquisition Seems Strategic: In December 2021, Thermo Fisher completed its colossal $17.4-billion acquisition of PPD, Inc. Per management, the addition of PPD's leading clinical research services expands the company’s value proposition for its biotech and pharmaceutical customers, strengthening its work in bringing life-changing therapies to market that benefit patients worldwide. The acquisition is anticipated to expand Thermo Fishers’ global reach in the attractive, high-growth clinical research services industry.
This business is expected to deliver $6.7 billion in 2022 in revenue, which indicates 11% core organic growth on a full-year basis, up three percentage points from the company’s previous guidance.
Downsides
Weak Margins: Thermo Fisher’s gross margin of 47.4% in the first quarter contracted 657 basis points (bps) year over year. Meanwhile, the adjusted operating margin for the quarter came in at 28.9%, reflecting a contraction of 613 bps.
Exposure to Foreign Currency: Thermo Fisher derives more than 50% of its revenues from the international market, which exposes it to fluctuations in foreign currency. In the past several years, the company’s earnings were affected significantly by a headwind from foreign exchange.
Tough Competition: On account of its diversified portfolio, Thermo Fisher faces different types of competitors, including a broad range of manufacturers and third-party distributors. The competitive landscape is quite tough with changing technology and customer demands that require consistent research and development.
Estimate Trend
Over the past 90 days, the Zacks Consensus Estimate for Thermo Fisher’s 2022 earnings has moved 0.8% north to $22.70.
The Zacks Consensus Estimate for its 2022 revenues is pegged at $42.49 billion, suggesting an 8.4% rise from the 2021 reported figure.
Key Picks
A few better-ranked stocks in the broader medical space that investors can consider are AMN Healthcare Services, Inc. (AMN - Free Report) , Merck & Co., Inc. (MRK - Free Report) and Patterson Companies, Inc. (PDCO - Free Report) .
AMN Healthcare has a long-term earnings growth rate of 1.1%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.6%, on average. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare has outperformed its industry in the past year. AMN has gained 14.4% against the industry’s 34% fall.
Merck has a long-term earnings growth rate of 10.1%. The company surpassed earnings estimates in the trailing three quarters and missed in one, delivering a surprise of 13.4%, on average. It currently carries a Zacks Rank #2 (Buy).
Merck has outperformed its industry in the past year. MRK has gained 20.6% against the industry’s 14.7% growth.
Patterson Companies has an estimated long-term growth rate of 9.6%. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 16.5%. It currently flaunts a Zacks Rank #2.
Patterson Companies has outperformed its industry in the past year. PDCO has lost 1.1% compared with the industry’s 13% fall in the past year.