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Thermo Fisher (TMO) Beats on Q2 Earnings, Lifts Guidance

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Thermo Fisher Scientific Inc.'s (TMO - Free Report) second-quarter 2019 adjusted earnings per share (EPS) came in at $3.04, beating the Zacks Consensus Estimate by 1%. The figure also improved from the year-ago quarterly figure by 10.5%. On a reported basis, EPS was $2.77, compared with $1.85 in the year-ago quarter.

Revenues in the quarter under review grossed $6.32 billion, up 3.9% year over year. The top line remained in line the Zacks Consensus Estimate.

Quarter in Detail

Organic revenues in the reported quarter grew 5% year over year while acquisitions drove revenues by 1%. Currency translation affected total revenues by 2%.

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 (27.1% of total revenues) improved 9% year over year to $1.71 billion while Analytical Instruments Segment sales (21%) edged up 1% to $1.32 billion.

Revenues at the Laboratory Products and Services segment (41.7%) rose 3% to $2.63 billion. The Specialty Diagnostics segment (14.9%) recorded a 1% rise to $949 million.

Gross margin of 46.7% during the second quarter contracted 50 basis points (bps) year over year despite a 2.8% improvement in gross profits. Adjusted operating margin contracted 14 bps to 22.8% on a 2.4% rise in adjusted operating expenses.

The company exited the second quarter of 2019 with cash and cash equivalents of $2.29 billion, compared with $1.10 billion in the first quarter. Year-to-date, net cash provided by operating activities was $1.94 billion compared with $1.52 billion a year ago.

2019 Guidance

Banking on a stronger operational performance, Thermo Fisher has raised its 2019 revenue and earnings guidance.

Revenue guidance has been raised to a new range of $25.30 to $25.50 billion (from the earlier-provided range of $25.17 to $25.47 billion) indicating projected revenue growth in the band of 4% to 5% from 2018. The Zacks Consensus Estimate of $25.41 billion remains within the guided range.

Adjusted EPS guidance for 2019 has been raised to a new range of $12.16 to $12.26 (from previous range of $12.08 to $12.22) indicating 9% to 10% growth from 2018. The Zacks Consensus Estimate of $12.20 remains within the guided range.

Bottom Line

Thermo Fisher ended the second quarter of 2019 with adjusted earnings ahead of the Zacks Consensus Estimate and revenues in line with the mark.

We are encouraged by the launch of a range of new products within mass spectrometry, including two new-generation Orbitrap systems – the Exploris 480 and Eclipse Tribrid. Within genetic analysis, the company launched the Applied Biosystems QuantStudio 6 and 7 Pro Real-Time PCR systems to automate qPCR workflows.

We are also looking forward to the company’s recently-completed acquisition of Brammer Bio, a leader in viral vector manufacturing, significantly expanding capabilities in the fast-growing gene and cell therapy market.

Zacks Rank & Key Picks

Thermo Fisher has a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader medical space are Hologic Inc. (HOLX - Free Report) , DENTSPLY SIRONA Inc. (XRAY - Free Report) and Teleflex Inc. (TFX - Free Report) .

Hologic is scheduled to release second-quarter 2019 results on Jul 31. The Zacks Consensus Estimate for the quarter’s adjusted EPS is pegged at 61 cents and for revenues stands at $834.6 million. The stock carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DENTSPLY SIRONA is scheduled to release second-quarter 2019 results on Aug 2. The Zacks Consensus Estimate for the period’s adjusted EPS is 62 cents and for revenues, $1.03 billion. The stock sports a Zacks Rank #1.

Teleflex is expected to release second-quarter 2019 results on Aug 1. The Zacks Consensus Estimate for adjusted EPS for the to-be-reported quarter is $2.59 and for the top line, $636.7 million. The stock has a Zacks Rank of 2.

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