A month has gone by since the last earnings report for Thermo Fisher Scientific (TMO Quick QuoteTMO - Free Report) . Shares have lost about 3.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Thermo Fisher due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Thermo Fisher Q2 Earnings Miss Estimates, Margins Down

Thermo Fisher Scientific’s second-quarter 2023 adjusted earnings per share 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.

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.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

The consensus estimate has shifted -11.9% due to these changes.

VGM Scores

At this time, Thermo Fisher has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Thermo Fisher has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.