Thermo Fisher Scientific Inc. (TMO Quick QuoteTMO - Free Report) is likely to gain in the coming quarters, backed by the strength of its M&A strategy.  The company continues to fortify its industry leadership through a slew of high-impact product launches. We are also positive about Thermo Fisher’s business performance across end markets. However, competitive pressures and the impact of macroeconomic pressures are concerning for the company.

In the past year, this Zacks Rank #3 (Hold) stock has decreased 6.6% compared with the 0.9% fall of the industry and an 18.1% rise of the S&P 500 composite.

The renowned medical and laboratory equipment provider has a market capitalization of $186.36 billion. TMO has an earnings yield of 4.63% against the industry’s -8.24%. The company’s earnings surpassed estimates in three of the trailing four quarters and missed in one, delivering an average surprise of 1.7%.

Let’s delve deeper.

Upsides

Strategic Acquisitions to Boost Growth: Thermo Fisher’s business strategy primarily includes expansion through the strategic acquisition of technologies and businesses that complement or augment the company’s existing products and services. In August 2023, TMO acquired CorEvitas for $912.5 million in cash. The buyout of the science-led, real-world data intelligence company advances Thermo Fisher’s world-class clinical research capabilities with the leading regulatory-grade registry platform.

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Earlier in June, Thermo Fisher acquired MarqMetrix, which is considered an excellent strategic fit for the company and adds highly complementary Raman-based in-line Process Analytical Technology to Thermo Fisher’s portfolio.

Impressive Product Introductions: Thermo Fisher recently launched two new next-generation sequencing-based options to support preimplantation genetic testing-aneuploidy used commonly to inform in vitro fertilization and intracytoplasmic sperm injection research. During the same month, the company introduced Diomni Enterprise Software, helping streamline routine diagnostics testing for standardization and faster time to results.

Thermo Fisher’s Gibco OncoPro Tumoroid Culture Medium Kit is the first commercially available culture medium specifically developed for the expansion of patient-derived tumoroids or cancer organoids from multiple cancer indications. The new-generation, fully automated (S)TEM metrology solution — the Thermo Scientific Metrios 6 Scanning Transmission Electron Microscope ((S)TEM) — is designed to help enhance productivity and deliver data quality assurance for high-volume semiconductor manufacturing.

Strength in End Markets:  Of late, it has been observed that the company’s biosciences and bioproduction businesses have expanded their capacity to meet the needs of pharma and biotech customers to meet global vaccine manufacturing requirements. Additionally, the pharma services business has been providing pharma and biotech customers with the services they need to develop and produce vaccines and therapies globally. 

Thermo Fisher registered the strongest growth in the pharma and biotech end market in the last reported second quarter of 2023. The company registered very strong growth in the electron microscopy and chromatography and mass spectrometry businesses, as well as the research and safety market channel. The strongest growth in the end market was in analytical instrument businesses.

Downsides

Tough Competitive Pressure: For 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 continuous research and development.

Macroeconomic Challenges Continue to Weigh on TMO: The challenging macroeconomic scenario and slower economic recovery in China have affected Thermo Fisher's growth. The company has been witnessing headwinds in the government and academic markets. Moreover, many countries in Europe are also going through a tough time, which might impact their academic budgets. In the second quarter of 2023, Thermo Fisher registered a year-over-year decline in sales in North America and Asia Pacific.

Estimate Trend

The Zacks Consensus Estimate for the company’s 2023 earnings per share (EPS) has remained constant at $22.37 in the past 30 days.

The Zacks Consensus Estimate for the company’s 2023 revenues is pegged at $45.53 billion. This suggests a 3.1% drop from the year-ago reported number.

Key Picks

Some better-ranked stocks in the broader medical space are Haemonetics (HAE Quick QuoteHAE - Free Report) , Align Technology (ALGN Quick QuoteALGN - Free Report) and Cardinal Health (CAH Quick QuoteCAH - Free Report) .

Haemonetics has an estimated earnings growth rate of 26.1% for fiscal 2024 compared with the industry’s 18.7%. HAE’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 19.39%. Its shares have rallied 15.1% against the industry’s 9.4% fall in the past year.

HAE carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Align Technology, carrying a Zacks Rank #2 at present, has a long-term estimated earnings growth rate of 17.5% compared with the industry’s 12.8%. Shares of the company have increased 25.8% compared with the industry’s 20.6% growth over the past year.

ALGN’s earnings surpassed estimates in three of the trailing four quarters and missed once. In the last reported quarter, it delivered an average earnings surprise of 9.9%.

Cardinal Health, carrying a Zacks Rank #2 at present, has an estimated long-term earnings growth rate of 14.2% compared with the industry’s 12.8%. Shares of CAH have surged 36.7% compared to the industry’s 20.6% rise over the past year.

CAH’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 16.03%. In the last reported quarter, it delivered an average earnings surprise of 4.73%.