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Here's Why You Should Hold on to Thermo Fisher (TMO) for Now
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Thermo Fisher Scientific Inc. (TMO - Free Report) has been gaining from robust segmental growth and product launches. The expansion of the company’s global market outreach by the means of acquisitions and setting up new centers also buoy optimism. However, the contraction of the gross margin in the fourth quarter is concerning.
Over the past year, shares of the Zacks Rank #3 (Hold) company have outperformed its industry. It has gained 25.1% compared with 6.5% growth of its industry. Also, it has outperformed the S&P 500’s 14.9% rally during the same period.
The renowned medical and laboratory equipment provider has a market capitalization of $124.79 billion. The company projects 14% growth for the next five years and expects to maintain its strong segmental performance. Further, it delivered a positive earnings surprise of 1.5%, on average, over the trailing four quarters.
Let’s delve deeper.
Impressive Q4 Results: Thermo Fisher exited fourth-quarter 2019 with better-than-expected results. We are upbeat about strong year-over-year revenue growth of the majority of its segments. The company’s strength in all of its end markets is impressive. Globally, it registered solid international performance, with growth in Europe and the Asia Pacific. The launch of the Ion Torrent Genexus next-generation sequencing instrument also instills optimism.
Strong Bioproduction Business: We are optimistic about the growing market demand for Thermo Fisher’s Gibco Cell Culture for bioprocessing, chromatography and protein purification. The company launched a scalable bioreactor workflow called Thermo Scientific TruBio Discovery automation system in 2019. It also acquired Brammer Bio, thus making another major investment in this field. Apart from these, the purchase of the Advanced Bioprocessing business from Becton, Dickinson and Company (“BD”) is expected to significantly expand the company’s Life Sciences Solutions line of offerings.
Acquisitions: We are optimistic about the recently announced acquisition of QIAGEN by Thermo Fisher, which is expected to be completed in the first half of 2021, subject to certain customary closing conditions. The buyout deal will enable Thermo Fisher to expand its Specialty Diagnostics portfolio and improve its R&D segment.
Further, Thermo Fisher acquired a site from GlaxoSmithKline in Cork, Ireland, which produces complex Active Pharmaceutical Ingredients used to treat diseases, including childhood cancers, depression and Parkinson’s. Apart from this, Thermo Fisher acquired HighChem, a small business, which expands its mass spectrometry software offerings.
Downsides
Competitive Landscape: The company faces significant competition from a broad range of manufacturers and third-party distributors. The changing technology and customer demand that requires continuous research and development is making it tougher for Thermo Fisher.
Economic Uncertainty: A major part of the company’s revenues are generated from its international business, which, in turn, is heavily dependent on general economic conditions. It has been witnessing headwinds in the government and academic markets. Moreover, many European countries are having a tough time, which might impact their academic budgets. We remain cautious since growth could further moderate if the economic scenario worsens.
Estimate Trend
The company is witnessing a positive estimate revision trend for 2020. Over the past 60 days, the Zacks Consensus Estimate for its earnings has moved 0.1% north to $13.61.
The Zacks Consensus Estimate for the company’s first-quarter 2020 revenues is pegged at $6.34 billion, suggesting a 3.5% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks from the broader medical space are ResMed Inc. (RMD - Free Report) , Medtronic plc (MDT - Free Report) and Hill-Rom Holdings, Inc. .
Medtronic’s long-term earnings growth rate is estimated at 7.4%. The company presently carries a Zacks Rank #2.
Hill-Rom’s long-term earnings growth rate is estimated at 11.1%. It currently carries a Zacks Rank #2.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
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Here's Why You Should Hold on to Thermo Fisher (TMO) for Now
Thermo Fisher Scientific Inc. (TMO - Free Report) has been gaining from robust segmental growth and product launches. The expansion of the company’s global market outreach by the means of acquisitions and setting up new centers also buoy optimism. However, the contraction of the gross margin in the fourth quarter is concerning.
Over the past year, shares of the Zacks Rank #3 (Hold) company have outperformed its industry. It has gained 25.1% compared with 6.5% growth of its industry. Also, it has outperformed the S&P 500’s 14.9% rally during the same period.
The renowned medical and laboratory equipment provider has a market capitalization of $124.79 billion. The company projects 14% growth for the next five years and expects to maintain its strong segmental performance. Further, it delivered a positive earnings surprise of 1.5%, on average, over the trailing four quarters.
Let’s delve deeper.
Impressive Q4 Results: Thermo Fisher exited fourth-quarter 2019 with better-than-expected results. We are upbeat about strong year-over-year revenue growth of the majority of its segments. The company’s strength in all of its end markets is impressive. Globally, it registered solid international performance, with growth in Europe and the Asia Pacific. The launch of the Ion Torrent Genexus next-generation sequencing instrument also instills optimism.
Strong Bioproduction Business: We are optimistic about the growing market demand for Thermo Fisher’s Gibco Cell Culture for bioprocessing, chromatography and protein purification. The company launched a scalable bioreactor workflow called Thermo Scientific TruBio Discovery automation system in 2019. It also acquired Brammer Bio, thus making another major investment in this field. Apart from these, the purchase of the Advanced Bioprocessing business from Becton, Dickinson and Company (“BD”) is expected to significantly expand the company’s Life Sciences Solutions line of offerings.
Acquisitions: We are optimistic about the recently announced acquisition of QIAGEN by Thermo Fisher, which is expected to be completed in the first half of 2021, subject to certain customary closing conditions. The buyout deal will enable Thermo Fisher to expand its Specialty Diagnostics portfolio and improve its R&D segment.
Further, Thermo Fisher acquired a site from GlaxoSmithKline in Cork, Ireland, which produces complex Active Pharmaceutical Ingredients used to treat diseases, including childhood cancers, depression and Parkinson’s. Apart from this, Thermo Fisher acquired HighChem, a small business, which expands its mass spectrometry software offerings.
Downsides
Competitive Landscape: The company faces significant competition from a broad range of manufacturers and third-party distributors. The changing technology and customer demand that requires continuous research and development is making it tougher for Thermo Fisher.
Economic Uncertainty: A major part of the company’s revenues are generated from its international business, which, in turn, is heavily dependent on general economic conditions. It has been witnessing headwinds in the government and academic markets. Moreover, many European countries are having a tough time, which might impact their academic budgets. We remain cautious since growth could further moderate if the economic scenario worsens.
Estimate Trend
The company is witnessing a positive estimate revision trend for 2020. Over the past 60 days, the Zacks Consensus Estimate for its earnings has moved 0.1% north to $13.61.
The Zacks Consensus Estimate for the company’s first-quarter 2020 revenues is pegged at $6.34 billion, suggesting a 3.5% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks from the broader medical space are ResMed Inc. (RMD - Free Report) , Medtronic plc (MDT - Free Report) and Hill-Rom Holdings, Inc. .
ResMed has a projected long-term earnings growth rate of 14.5%. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Medtronic’s long-term earnings growth rate is estimated at 7.4%. The company presently carries a Zacks Rank #2.
Hill-Rom’s long-term earnings growth rate is estimated at 11.1%. It currently carries a Zacks Rank #2.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>