We recently reiterated our Neutral recommendation on
Thermo Fisher Scientific
), a major scientific instrument maker. While we hold a favorable
view regarding the company's huge potential in the emerging
markets, cost reduction initiatives and value added acquisitions,
concerns linger around the overall soft industry trends with
headwinds in the government and academic markets. The stock
currently carries a Zacks Rank #3 (Hold).
Why at Neutral?
Thermo Fisher's fourth-quarter 2012 results were encouraging
with adjusted earnings per share (EPS) of $1.36, surging past
both the Zacks Consensus Estimate of $1.28 and the adjusted EPS
of $1.19 in the year-ago period. Revenues increased 6% year over
year based on 4% organic growth.
Given the huge potential in the emerging markets, the company
has been focusing on these regions, which paid off with their
robust performance during the quarter. In the reported quarter,
TMO recorded high single-digit growth in Asia-Pacific and low
double-digit growth in Rest of the World. We are also optimistic
about the company's persistent acquisition spree including the
recent One Lambda, Dionex and Phadia acquisitions, which are
expected to strengthen Thermo Fisher's product portfolio and
provide better access to regions with strong potential.
Moreover, Thermo Fisher continued to benefit from the
successful execution of its $100 million and $75 million of
restructuring actions initiated in 2011 and 2012,
However, over the past several years, Thermo Fisher has been
witnessing headwinds in the government and academic markets.
Moreover, many countries in Europe are facing a turbulent
economic situation, which might impact their academic budgets. We
remain cautious since growth could moderate if the economic
Over the past 30 days, three of the 13 firms covering the
stock made positive estimate revisions for the current quarter,
while two moved in the opposite direction, implying that they
still hold similar views on the stock.
Other Stocks to Consider
While we prefer to remain on the sidelines on Thermo Fisher,
other medical device stocks worth a look are
Medical Action Industries Inc.
). All these stocks carry a Zacks Rank #1 (Strong Buy).
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THERMO FISHER (TMO): Free Stock Analysis
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