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Thermo Fisher (TMO) Q2 Earnings Miss Estimates, Margins Down
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Thermo Fisher Scientific Inc.'s (TMO - Free Report) second-quarter 2023 adjusted earnings per share (EPS) of $5.15 lagged the Zacks Consensus Estimate by 5.2%. The figure also declined 6.5% year over year.
The adjusted number excludes certain non-recurring expenses, including asset amortization costs and certain restructuring costs.
GAAP EPS was $3.51, down 18.8% on a year-over-year basis.
Revenues in Detail
Revenues in the quarter totaled $10.69 billion, down 2.6% year over year. The top line lagged the Zacks Consensus Estimate by 2.8%.
Segment Details
Organic revenues in the reported quarter declined 3% year over year, while Core organic revenue growth was 2%.
Thermo Fisher operates under four business segments — Life Sciences Solutions, Analytical Instruments, Specialty Diagnostics and Laboratory Products and Biopharma Services.
Revenues in the Life Sciences Solutions segment (23% of total revenues) declined 25.2% year over year to $2.46 billion, while Analytical Instruments Segment sales (16.4%) increased 8.8% to $1.75 billion.
Revenues in the Laboratory Products and Biopharma Services segment (54.6%) rose 5.3% to $5.83 billion. The Specialty Diagnostics segment (10.4%) recorded a 0.7% year-over-year rise in revenues to $1.11 billion.
Margin Analysis
The gross margin of 40.8% in the second quarter contracted 228 basis points (bps) year over year on a 1.3% rise in the cost of revenues.
In the quarter, selling, general and administrative expenses fell 3.9% to $1.67 billion. Research and development expenses declined 5.5% to $345 million.
Thermo Fisher Scientific Inc. Price, Consensus and EPS Surprise
The adjusted operating margin in the quarter came in at 21.9%, reflecting a contraction of 198 bps.
Financial Position
The company exited second-quarter 2023 with cash and cash equivalents of $3.13 billion compared with $3.48 billion at the end of first-quarter 2023.
Cumulative net cash provided by operating activities was $2.27 billion compared with $3.73 billion a year ago.
Thermo Fisher has a consistent dividend-paying history, with the five-year annualized dividend growth being 16.43%.
Guidance
Thermo Fisher updated its full-year 2023 guidance.
The company expects 2023 revenues in the range of $43.4-$44.0 billion, with Core organic revenue growth of 2-4%. The Zacks Consensus Estimate for the same is pegged at $45.24 billion.
The adjusted EPS is expected in the range of $22.28-$22.72. The Zacks Consensus Estimate for the metric is pegged at $23.60 billion.
Our Take
Thermo Fisher exited the second quarter of 2023 with lower-than-expected results. The challenging macroeconomic environment and a slowdown in economic activity in China and across the world hampered revenues. The year-over-year decline in revenues in the Life Science Solutions is disappointing. The contraction of margins, due to escalating costs and expenses, does not bode well either. The year-over-year decline in adjusted earnings is a concern.
On a positive note, the robust year-over-year revenue growth in the Analytical Instruments and the Laboratory Products and Biopharma Services segments is promising. During the first quarter, strong execution of proven growth strategy, launching a range of high-impact, innovative new products aided the company’s growth. The company strengthened its industry-leading commercial engine and trusted partner status with the opening of a state-of-the-art customer center of excellence in Milan. This allowed it to consolidate capabilities from across the company to better serve customers and enhance productivity.
Zacks Rank and Key Picks
Thermo Fisher currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Abbott Laboratories (ABT - Free Report) , Elevance Health, Inc. (ELV - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) .
Abbott, carrying a Zacks Rank of 2, reported second-quarter 2023 adjusted EPS of $1.08, beating the Zacks Consensus Estimate by 3.8%. Revenues of $9.98 billion outpaced the consensus mark by 2.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Abbott has a long-term estimated growth rate of 5.1%. ABT’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 12.4%.
Elevance Health reported second-quarter 2023 adjusted EPS of $9.04, beating the Zacks Consensus Estimate by 2.5%. Revenues of $43.38 billion surpassed the Zacks Consensus Estimate by 4.5%. It currently carries a Zacks Rank #2.
Elevance Health has a long-term estimated growth rate of 12.1%. ELV’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 2.8%.
Intuitive Surgical reported second-quarter 2023 adjusted EPS of $1.42, beating the Zacks Consensus Estimate by 7.6%. Revenues of $1.76 billion surpassed the Zacks Consensus Estimate by 1.4%. It currently carries a Zacks Rank #2.
Intuitive Surgical has a long-term estimated growth rate of 14.5%. ISRG’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 4.2%.
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Thermo Fisher (TMO) Q2 Earnings Miss Estimates, Margins Down
Thermo Fisher Scientific Inc.'s (TMO - Free Report) second-quarter 2023 adjusted earnings per share (EPS) of $5.15 lagged the Zacks Consensus Estimate by 5.2%. The figure also declined 6.5% year over year.
The adjusted number excludes certain non-recurring expenses, including asset amortization costs and certain restructuring costs.
GAAP EPS was $3.51, down 18.8% on a year-over-year basis.
Revenues in Detail
Revenues in the quarter totaled $10.69 billion, down 2.6% year over year. The top line lagged the Zacks Consensus Estimate by 2.8%.
Segment Details
Organic revenues in the reported quarter declined 3% year over year, while Core organic revenue growth was 2%.
Thermo Fisher operates under four business segments — Life Sciences Solutions, Analytical Instruments, Specialty Diagnostics and Laboratory Products and Biopharma Services.
Revenues in the Life Sciences Solutions segment (23% of total revenues) declined 25.2% year over year to $2.46 billion, while Analytical Instruments Segment sales (16.4%) increased 8.8% to $1.75 billion.
Revenues in the Laboratory Products and Biopharma Services segment (54.6%) rose 5.3% to $5.83 billion. The Specialty Diagnostics segment (10.4%) recorded a 0.7% year-over-year rise in revenues to $1.11 billion.
Margin Analysis
The gross margin of 40.8% in the second quarter contracted 228 basis points (bps) year over year on a 1.3% rise in the cost of revenues.
In the quarter, selling, general and administrative expenses fell 3.9% to $1.67 billion. Research and development expenses declined 5.5% to $345 million.
Thermo Fisher Scientific Inc. Price, Consensus and EPS Surprise
Thermo Fisher Scientific Inc. price-consensus-eps-surprise-chart | Thermo Fisher Scientific Inc. Quote
The adjusted operating margin in the quarter came in at 21.9%, reflecting a contraction of 198 bps.
Financial Position
The company exited second-quarter 2023 with cash and cash equivalents of $3.13 billion compared with $3.48 billion at the end of first-quarter 2023.
Cumulative net cash provided by operating activities was $2.27 billion compared with $3.73 billion a year ago.
Thermo Fisher has a consistent dividend-paying history, with the five-year annualized dividend growth being 16.43%.
Guidance
Thermo Fisher updated its full-year 2023 guidance.
The company expects 2023 revenues in the range of $43.4-$44.0 billion, with Core organic revenue growth of 2-4%. The Zacks Consensus Estimate for the same is pegged at $45.24 billion.
The adjusted EPS is expected in the range of $22.28-$22.72. The Zacks Consensus Estimate for the metric is pegged at $23.60 billion.
Our Take
Thermo Fisher exited the second quarter of 2023 with lower-than-expected results. The challenging macroeconomic environment and a slowdown in economic activity in China and across the world hampered revenues. The year-over-year decline in revenues in the Life Science Solutions is disappointing. The contraction of margins, due to escalating costs and expenses, does not bode well either. The year-over-year decline in adjusted earnings is a concern.
On a positive note, the robust year-over-year revenue growth in the Analytical Instruments and the Laboratory Products and Biopharma Services segments is promising. During the first quarter, strong execution of proven growth strategy, launching a range of high-impact, innovative new products aided the company’s growth. The company strengthened its industry-leading commercial engine and trusted partner status with the opening of a state-of-the-art customer center of excellence in Milan. This allowed it to consolidate capabilities from across the company to better serve customers and enhance productivity.
Zacks Rank and Key Picks
Thermo Fisher currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Abbott Laboratories (ABT - Free Report) , Elevance Health, Inc. (ELV - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) .
Abbott, carrying a Zacks Rank of 2, reported second-quarter 2023 adjusted EPS of $1.08, beating the Zacks Consensus Estimate by 3.8%. Revenues of $9.98 billion outpaced the consensus mark by 2.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Abbott has a long-term estimated growth rate of 5.1%. ABT’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 12.4%.
Elevance Health reported second-quarter 2023 adjusted EPS of $9.04, beating the Zacks Consensus Estimate by 2.5%. Revenues of $43.38 billion surpassed the Zacks Consensus Estimate by 4.5%. It currently carries a Zacks Rank #2.
Elevance Health has a long-term estimated growth rate of 12.1%. ELV’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 2.8%.
Intuitive Surgical reported second-quarter 2023 adjusted EPS of $1.42, beating the Zacks Consensus Estimate by 7.6%. Revenues of $1.76 billion surpassed the Zacks Consensus Estimate by 1.4%. It currently carries a Zacks Rank #2.
Intuitive Surgical has a long-term estimated growth rate of 14.5%. ISRG’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 4.2%.