Thermo Fisher Scientific Inc.
TMO
has been gaining from robust year-over-year revenue growth in the Analytical Instruments, and the Laboratory Products and Biopharma Services segments. The company’s strategic acquisitions of PPD, Inc. and PeproTech raise investors’ confidence. However, forex woes and stiff competition raise apprehension.
Over the past year, this Zacks Rank #3 (Hold) stock has gained 26.3% against the 12.8% decline of the
industry
and a 2.1% decline of the S&P 500 composite.
The renowned medical and laboratory equipment provider has a market capitalization of $222.18 billion. Its first-quarter 2022 earnings surpassed the Zacks Consensus Estimate by 17.5%.
Let’s delve deeper.
Factors at Play
Strength in End Markets:
In first-quarter 2022, Thermo Fisher witnessed strength in three of its four end markets, categorized either by customer type or geography. Within the pharma and biotech end market, the company delivered growth in the mid-teens on broad-based strength in this end market.
In academics and government, Thermo Fisher grew in the mid-single digits, with good growth in biosciences, electron microscopy, and research and safety market channel. Within industrial and applied, Thermo Fisher grew in the mid-teens in the quarter on strong growth in all of its analytical instrument businesses, including electron microscopy, chromatography, mass spectrometry, and chemical analysis, as well as the research and safety market channel.
Focus on International Markets:
Thermo Fisher boasts strong international operations. It has witnessed consistent growth in high-growth and emerging markets. In the first quarter of 2022, the Asia Pacific operation grew in the mid-teens. In high-growth emerging markets, the company registered strong performance, including China, which grew in the double digits in the quarter.
Within the Analytical Instruments business, the company has a strong international footprint at present. On its first-quarter earnings call, Thermo Fisher noted that the National Institute of Biological Sciences is using its mass spectrometers in Beijing to accelerate their research in structural biology.
PPD Acquisition Seems Strategic:
In December 2021, Thermo Fisher completed its colossal $17.4-billion acquisition of PPD, Inc., a renowned global contract research organization providing clinical research services to the biopharma and biotech industry.
Image Source: Zacks Investment Research
Per management, the addition of PPD’s leading clinical research services expands the company’s value proposition for its biotech and pharmaceutical customers, strengthening its work in bringing life-changing therapies to market that benefit patients worldwide.
The business is expected to deliver revenues of $6.7 billion in 2022, which represents 11% core organic growth on a year-over-year basis.
Downsides
Exposure to Foreign Currency:
Thermo Fisher derives more than 50% of its revenues from the international market, which exposes it to fluctuations in foreign currency. In the past several years, the company’s earnings were affected significantly by headwinds from foreign exchange.
Tough Competitive Pressure:
On account of its diversified portfolio, Thermo Fisher faces different competitors, including a broad range of manufacturers and third-party distributors. The competitive landscape is quite tough with changing technology and customer demands, which require continuous research and development.
Estimate Trend
Over the past 90 days, the Zacks Consensus Estimate for Thermo Fisher’s 2022 earnings has moved 0.8% north to $22.70.
The Zacks Consensus Estimate for its 2022 revenues is pegged at $42.49 billion, suggesting an 8.4% rise from the 2021 reported figure.
Key Picks
A few better-ranked stocks in the broader medical space are
UnitedHealth Group Incorporated
UNH
,
Medpace Holdings, Inc.
MEDP
and
Alkermes plc (
ALKS
).
UnitedHealth, having a Zacks Rank #2 (Buy), reported first-quarter 2022 earnings per share (EPS) of $5.49, which beat the Zacks Consensus Estimate by 1.7%. Revenues of $80.1 billion outpaced the consensus mark by 14.2%.
You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
UnitedHealth has an estimated long-term growth rate of 14.8%. UNH’s earnings surpassed estimates in the trailing four quarters, the average surprise being 3.7%.
Medpace reported first-quarter 2022 adjusted EPS of $1.69, which surpassed the Zacks Consensus Estimate by 34.1%. Revenues of $330.9 million outpaced the Zacks Consensus Estimate by 1.1%. It currently has a Zacks Rank #2.
Medpace has a historical growth rate of 27.3%. MEDP’s earnings surpassed estimates in the trailing four quarters, the average surprise being 17.1%.
Alkermes reported first-quarter 2022 adjusted EPS of 12 cents, which surpassed the Zacks Consensus Estimate of a penny. Revenues of $278.6 million outpaced the Zacks Consensus Estimate by 6.2%. It currently has a Zacks Rank #2.
Alkermes has an estimated long-term growth rate of 25.1%. ALKS’ earnings surpassed estimates in the trailing four quarters, the average surprise being 350.5%.
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