Thermo Fisher Scientific, Inc.
) reported its second-quarter 2014 financial results, accounting
for the inclusion of Life Technologies and excluding divestures
related to the acquisition.
Adjusted earnings per share (EPS) in the reported quarter came in
at $1.72. The figure remained well ahead of the Zacks Consensus
Estimate of $1.62 and surpassed the year-ago adjusted EPS number by
a formidable 30%. On a reported basis, second-quarter EPS of 69
cents showed a year-over-year decline of 9.2% largely due to higher
acquisition-related charges in 2014.
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Revenues increased 33% year over year to $4.32 billion during the
quarter. The increase was owing to 5% organic growth, 27% increase
in revenues due to acquisition and 1% due to currency translation.
With the acquisition of Life Technologies, Thermo Fisher currently
operates in four business segments viz. Life Sciences Solutions
Segment, Analytical Instruments Segment, Specialty Diagnostics
Segment, and Laboratory Products and Services Segment.
The four aforementioned segments recorded second-quarter revenues
of $1.10 billion (508% annualized growth), $793 million (up 4.0%),
$855 million (up 8%) and $1.70 billion (up 7%), respectively. The
stupendous growth in the Life Sciences Solutions Segment was due to
the inclusion of the Life Technologies acquisition for the entire
Gross margin of 45.4% during the second quarter was up 154 basis
points (bps) year over year. In addition, Thermo Fisher witnessed a
48.1% increase in adjusted operating income to $923.6 million.
Adjusted operating margin came in at 21.4%, an expansion of huge
210 bps year over year.
The company exited the quarter with cash and cash equivalents and
short-term investment of $605.9 million compared with $5.83 billion
at the end of 2013. Operating cash flow for the quarter was $991.8
million versus the year-ago figure of $778.4 million.
Taking into consideration a solid first-half performance in 2014,
increased synergies from the Life Technologies acquisition and the
impending divestiture of the Cole-Parmer business, Thermo Fisher
updated its fiscal 2014 guidance.
The company now expects to report adjusted EPS for the year in the
range of $6.85 to $6.97 (implying annualized growth of 26% to 29%),
an increase from the earlier announced range of $6.80 to $6.95 (25%
to 28%). The Zacks Consensus Estimate of $6.89 remains within the
On the other hand, the company narrowed its 2014 revenue
expectation to the range of $16.86 to $16.98 billion (annualized
growth of 29% to 30% from 2013) from the earlier range of $16.84 to
$17.00 billion (same).
With a full quarter of operation post the Life Technologies
acquisition, Thermo Fisher posted a better-than-expected
second-quarter 2014 with adjusted earnings per share ahead of the
Zacks Consensus Estimate. The top-and-bottom-line results also
sailed past the year-ago numbers.
According to the company, the takeover has led to the emergence
of 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.
Thermo Fisher expects this acquisition to help expand its
commercial infrastructure and global presence. The company is
currently working on the growth opportunities in Asia Pacific and
emerging markets. Given the huge potential in the region and the
high growth rate in China, Thermo Fisher is likely to exceed its
goal of garnering 25% revenues from the high-growth Asia-Pacific
region and emerging markets by 2016.
We take a note that earlier this month Thermo Fisher had inked a
definitive agreement with private equity firm GTCR, LLC whereby the
latter has agreed to buy the Cole-Parmer channel business of Thermo
Fisher for a deal value of $480 million. Thermo Fisher expects the
deal, 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
Thermo Fisher currently carries a Zacks Rank #4 (Sell). Some
better-ranked stocks in the broader healthcare sector that warrant
a look are
Sirona Dental Systems Inc.
IDEXX Laboratories, Inc.
), carrying a Zacks Rank #2 (Buy).
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