Life Technologies Integration, Solid Q2 Drives Thermo Fisher - Analyst Blog


On Aug 17, 2014, we issued an updated research report on Thermo Fisher Scientific Inc. ( TMO ) - scientific instrument maker and a world leader in serving science. Despite challenging economic conditions, a competitive environment and pressure on core segments, Thermo Fisher managed to post healthy second-quarter 2014 results, handily beating both the revenue and earnings estimates. Notably, this was the first full quarter of operation post completion of the Life Technologies acquisition.

The adjusted earnings per share (EPS) of $1.72 and revenues of $4.32 billion steered ahead of the Zacks Consensus Estimate of $1.62 and $4.24 billion respectively. The results also sailed past the year-ago numbers.

The reported quarter takes into account Life Technologies' products reported under the Life Sciences Solutions segment. The company is perfectly on track with the integration and is making good progress on the execution of the plan.

In fact, we are encouraged to know that Thermo Fisher is ahead of its original synergy target for the year. The company currently expects to achieve $100 million in synergies in 2014, up from the $85 million originally anticipated. The company is also confident with its overall three-year synergy target which had been increased from $300 million to $350 million at the analyst meeting held in May this year.

Given Life Technologies' expansive line of consumables for genomic, and molecular and cell biology, the buyout is expected to complement Thermo Fisher's market-leading portfolio of analytical technologies and specialty diagnostics.

According to the company, the takeover has given birth to an unrivaled market leader serving research, Specialty Diagnostics and applied markets. As per management at Thermo Fisher, the acquisition supports its three-pronged growth strategy of technological innovation, a unique customer value proposition and expansion in emerging markets.

Additionally, Thermo Fisher expects the sellout of Cole-Parmer channel business, which is likely to be closed in the third quarter, to have immaterial impact on the company's 2014 EPS. This sellout decision is consistent with Thermo Fisher's strategy to focus on its core segment.

Additionally, substantial expansion in the Asia-Pacific market, mainly China, is on the cards for the company. Given the huge potential in the region and high growth rate in China, Thermo Fisher is likely to exceed its goal of garnering 25% of revenues from the high-growth Asia-Pacific region and emerging markets by 2016.

However, in a challenging market environment, mere 3% organic growth remains a matter of concern. Moreover, economic uncertainties and currency headwinds continue to act as major dampeners. The stock currently holds a Zacks Rank #2 (Buy).

Other Stocks to Consider

Some other well-ranked medical instruments stocks that warrant a look are Edwards Lifesciences Corp. ( EW ), Hologic Inc. ( HOLX ) and Hansen Medical, Inc.  ( HNSN ). All the three stocks carry a similar Zacks Rank #2.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: EPS , TMO , HOLX , EW , HNSN

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