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Thermo Fisher (TMO) Up 1.9% Since Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Thermo Fisher Scientific Inc (TMO - Free Report) . Shares have gained about 1.9% in the past month.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? 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.

Recent Earnings

Thermo Fisher reported better-than-expected performance in second-quarter 2017. Adjusted EPS came in at $2.30, beating the Zacks Consensus Estimate by 1.8% and the year-ago quarter figure by 13.0%. On a reported basis, second-quarter EPS of $1.56 marked a 20% year-over-year rise.

Revenues in the quarter came in at $4.99 billion, up 10% year over year. Sales also exceeded the Zacks Consensus Estimate of $4.91 billion by 1.6%.

Quarter in Detail

Organic revenues in the second quarter grew 4% year over year and up 8% on the back of acquisitions. Total revenue grew 1%, offset by currency translation.

Thermo Fisher currently operates under four business segments: Life Sciences Solutions, Analytical Instruments, Specialty Diagnostics and Laboratory Products and Services.

Revenues at the Life Sciences Solutions segment improved 3% year over year to $1.40 billion while Analytical Instruments Segment sales grew 47% to $1.17 billion, reflecting the acquisition of FEI Company. Revenues at the Laboratory Products and Services segment grew 4% to $1.79 billion, while the Specialty Diagnostics segment recorded a 1% increase to $862 million.

Gross margin of 48.3% during the second quarter was up 10 basis points (bps) year over year on a 10.3% rise in gross profits. Adjusted operating margin expanded approximately 80 bps to 23.1% despite a 4.3% rise in selling, general and administrative expenses and 21.5% increase in research and development expenses.

The company exited the second quarter with cash and cash equivalents of $611.0 million, compared with $713.3 million at the end of the previous quarter. Year-to-date net cash provided by operating activities was $1.21 billion, compared with $1.25 billion in the year-ago period.

Guidance Raised

Backed by a solid second-quarter performance and a less adverse foreign exchange environment forecast, Thermo Fisher raised its full-year 2017 financial guidance. The revenue guidance has been raised to a range of $19.71–$19.89 billion (growth of 8% to 9% from the previous year) from the earlier band of $19.51–$19.71 billion. The current Zacks Consensus Estimate of $19.65 billion is close to the low end of the guided range.

The company has also raised its adjusted EPS guidance to a range of $9.15 to $9.28, reflecting growth of 11% to 12% from the previous year (earlier prediction was $9.12 to $9.28). The Zacks Consensus Estimate of $9.23 per share is also near the low end of the band.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. There has been one revision higher for the current quarter.

VGM Scores

At this time, Thermo Fisher's stock has an average Growth Score of C, though it is doing a bit better on the momentum front with B. The stock was allocated also 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is more suitable for momentum investors than value and growth investors.

Outlook

The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.




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