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Thermo Fisher (TMO) Up 4.1% Since Last Earnings Report: Can It Continue?

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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 4.1% 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 Q3 Earnings on Growth In Major Arms

Thermo Fisher Scientific’s third-quarter 2019 adjusted earnings per share (EPS) came in at $2.94, beating the Zacks Consensus Estimate by 2.1%. The figure also improved from the year-ago quarterly figure by 12.2%. On a reported basis, EPS was $1.88, up 7.4% year over year.

Revenues in the quarter under review grossed $6.27 billion, up 5.9% year over year. The top line also beat the Zacks Consensus Estimate by 1.3%.

Quarter in Detail

Organic revenues in the reported quarter grew 7% year over year while currency translation affected total revenues by 1%.

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 13.3% year over year to $1.70 billion while Analytical Instruments Segment sales (21.7%) edged up 2.3% to $1.36 billion.

Revenues at the Laboratory Products and Services segment (41.8%) rose 6.1% to $2.62 billion. The Specialty Diagnostics segment (14%) recorded a 1.1% drop from the year-ago quarter to $0.88 billion.

Gross margin of 46% during the third quarter contracted 22 basis points (bps) year over year despite a 5.4% rise in gross profits. Adjusted operating margin for the quarter came in at 22.5%, reflecting an expansion of 27 bps.

The company exited the third quarter of 2019 with cash and cash equivalents of $1.27 billion, compared with $2.29 billion in the second quarter. Year to date, net cash provided by operating activities was $3.06 billion compared with $2.74 billion a year ago.

2019 Guidance

Banking on an improvement in operational performance, Thermo Fisher has raised its 2019 revenue and earnings guidance.

Revenue guidance has been raised to $25.34-$25.50 billion from the earlier-provided $25.30-$25.50 billion, indicating revenue growth of 4% to 5% from 2018. The Zacks Consensus Estimate of $25.43 billion is within the guided range.

Adjusted EPS guidance for 2019 has also been raised to $12.28 to $12.34 (previous range was $12.16 to $12.26), suggesting 10% to 11% growth from 2018. The Zacks Consensus Estimate of $12.25 falls below the guided range.

How Have Estimates Been Moving Since Then?

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

VGM Scores

At this time, Thermo Fisher has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. 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 downward for the stock, and the magnitude of this revision has been net zero. Notably, Thermo Fisher has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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