A month has gone by since the last earnings report for Thermo Fisher Scientific (TMO Quick QuoteTMO - Free Report) . Shares have lost about 7.4% 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 the most recent earnings report in order to get a better handle on the important drivers.

Thermo Fisher Q3 Earnings Top Estimates and Revenues Miss

Thermo Fisher’s third-quarter 2024 adjusted earnings per share (EPS) of $5.28 beat the Zacks Consensus Estimate by 0.6%. However, the figure decreased 7.2% year over year.

The adjusted number excludes certain expenses, including asset amortization costs and certain restructuring costs.

GAAP EPS was $4.25, down 3.8% on a year-over-year basis.

Q3 Revenues in Detail

Revenues in the quarter increased a modest 0.2% year over year to $10.60 billion. However, the top line missed the Zacks Consensus Estimate by 0.4%.

Both organic and core organic revenues in the reported quarter were flat year over year.

Segmental Analysis

Thermo Fisher operates under four business segments, as discussed below:

Life Sciences Solutions

Revenues in the Life Sciences Solutions segment (22.5% of total revenues) declined 1.9% year over year to $2.39 billion. This missed our model’s projection of $2.48 billion for this segment. 

Analytical Instruments

Revenues in this segment (17.1%) rose 3.1% to $1.81 billion. Our model’s projection was $1.98 billion.

Specialty Diagnostics

Revenues in the Specialty Diagnostics segment (10.7%) increased 4.2% year over year to $1.13 billion. This surpassed our model’s projected $1.05 billion revenues for this segment.

Laboratory Products and Biopharma Services

Revenues in this segment (54.2%) rose 0.2% to $5.74 billion. Our model’s projection was $5.59 billion.

Margin Performance

The gross margin of 41.7% in the third quarter contracted 20 basis points (bps) year over year on a 0.6% increase in the cost of revenues.

In the quarter, selling, general and administrative expenses rose 10.2% to $1.74 billion. Research and development expenses increased 8.5% to $346 million.

The adjusted operating margin in the quarter was 22%, reflecting a contraction of 193 bps.

Financial Position

The company ended the third quarter of 2024 with cash and cash equivalents and short-term investments of $6.65 billion compared with $8.82 billion at the end of the second quarter of 2024.

Cumulative net cash from operating activities at the end of the third quarter was $5.38 billion compared with $4.68 billion a year ago.

Thermo Fisher has a consistent dividend-paying history, with the five-year annualized dividend growth being 15.89%.

Revised 2024 Guidance

The company raised its 2024 adjusted EPS guidance to a new range of $21.35-$22.07 (earlier $21.29 to $22.07). The Zacks Consensus Estimate for the company’s full-year EPS stands at $21.72.

However, the company continues to expect 2024 revenues in the range of $42.4-$43.3 billion. The Zacks Consensus Estimate for the metric is pegged at $42.85 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

At this time, Thermo Fisher has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, 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. Notably, Thermo Fisher has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Thermo Fisher is part of the Zacks Medical - Instruments industry. Over the past month, Intuitive Surgical, Inc. (ISRG Quick QuoteISRG - Free Report) , a stock from the same industry, has gained 7.6%. The company reported its results for the quarter ended September 2024 more than a month ago.

Intuitive Surgical reported revenues of $2.04 billion in the last reported quarter, representing a year-over-year change of +16.9%. EPS of $1.84 for the same period compares with $1.46 a year ago.

For the current quarter, Intuitive Surgical is expected to post earnings of $1.76 per share, indicating a change of +10% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

Intuitive Surgical has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.