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Why Is Thermo Fisher (TMO) Up 0.6% Since Last Earnings Report?

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A month has gone by since the last earnings report for Thermo Fisher Scientific (TMO - Free Report) . Shares have added about 0.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Thermo Fisher 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 catalysts.

Thermo Fisher Beats on Q1 Earnings on Growth In All Lines

Thermo Fisher first-quarter 2019 adjusted earnings per share (EPS) came in at $2.81, beating the Zacks Consensus Estimate by 2.6%. The figure also improved from the year-ago quarterly figure by 12.4%. On a reported basis, EPS was $2.02, compared with $1.43 in the year-ago quarter.

Revenues in the quarter under review grossed $6.12 billion, up 4.6% year over year. The top line outpaced the Zacks Consensus Estimate of $6.02 billion.

Quarter in Detail

Organic revenues in the reported quarter grew 7% year over year while acquisitions drove revenues by 1%. Currency translation affected total revenues by 3%.

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

Revenues at the Life Sciences Solutions segment (26.3% of total revenues) improved 7% year over year to $1.61 billion while Analytical Instruments Segment sales (21.6%) rose 5% to $1.32 billion.

Revenues at the Laboratory Products and Services segment (41%) rose 4% to $2.41 billion. The Specialty Diagnostics segment (15.7%) recorded a 1% rise to $0.96 billion.

Gross margin of 46.2% during the first quarter contracted 5 basis points (bps) year over year despite a 4.5% improvement in gross profits. Adjusted operating margin expanded 31 bps to 22.1% on a 6.1% rise in adjusted operating profit.

The company exited the first quarter of 2019 with cash and cash equivalents of $1.10 billion, compared with $2.10 billion in 2018. In the first quarter, net cash provided by operating activities was $649 million compared with $78 million a year ago.

2019 Guidance

Considering the contributions from the company’s newly acquired Brammer Bio and expected impact of more adverse foreign exchange environment, Thermo Fisher has raised its 2019 revenue and earnings guidance.

Revenue guidance has been raised to anew range of $25.17 to $25.47 billion (from the earlier-provided range of $24.88 to $25.28 billion) indicating projected revenue growth in the band of 3% to 5% from 2018. The Zacks consensus Estimate of $25.21 billion remains within but close to the lower end of the guided range.

Adjusted EPS guidance for 2019 has been raised to a new range of $12.08 to $12.22 (from previous range of $12.00 to $12.20) indicating 9% to 10% growth from 2018.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Thermo Fisher has an average Growth Score of C, however its Momentum Score is doing a bit 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward 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.


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