Thermo Fisher Scientific
) reported adjusted earnings per share (EPS) of $1.30 in the
third quarter of fiscal 2013. The figure remained ahead of the
Zacks Consensus Estimate by 2 cents and surpassed the year-ago
adjusted EPS by 9.2%.
On a reported basis, third-quarter EPS of 86 cents showed a
year-over-year improvement of 8.9%. The company has performed
reasonably well amid a challenging global economic environment,
and expects to continue with this growth momentum for the rest of
Revenues increased 3% year over year to $3.19 billion during
the quarter, higher than the Zacks Consensus Estimate of $3.18
billion. The increase was owing to an organic growth of 2%.
During the quarter, acquisition-related sales growth was a mere
1% with currency translation having a nominal impact.
Thermo Fisher reports revenues under three segments -
Analytical Technologies, Specialty Diagnostics and Laboratory
Products and Services. These three segments recorded revenues of
$997 million (1% annualized growth), $759 million (up 7%) and
$1.58 billion (up 4%), during the third quarter,
Gross margin expanded 11 basis points (bps) to 43.9% during
Thermo Fisher witnessed an increase of 8.3% in adjusted
operating income to $583.1 million.
Adjusted operating margin came in at 18.2%, up 82 bps year
over year. Adjusted figures exclude amortization of
acquisition-related intangible assets and restructuring costs and
related tax benefits.
The company exited the quarter with cash and cash equivalents
of $1.84 billion compared with $805.6 million at the end of Dec
2012. Operating cash flow for the quarter was $505.5 million, up
from the year-ago figure of $479.9 million. A strong cash balance
helps the company pursue suitable acquisitions or reward its
shareholders through share buybacks.
Thermo Fisher updated its fiscal 2013 guidance. The company
tightened its revenue guidance to $12.87−$12.95 billion from the
earlier $12.83−$12.95 billion, reflecting annualized growth rate
of 3% to 4% (unchanged).
The company also expects adjusted EPS in the band of
$5.31−$5.39 from the earlier provided range of $5.29−$5.39 for
2013. This will result in annualized growth rate of 7% to 9%
The raising of the lower end of the EPS guidance reflects its
decision to suspend share buybacks for the rest of the year and
narrow its revenue guidance range. The 2013 guidance does not
include the effect of the proposed acquisition of Life
Technologies or the impact of related financing activities.
The current Zacks Consensus Estimate for EPS and revenues of
$5.35 and $12.92 billion, respectively, fall within the guided
For most of the last 7 years, Thermo Fisher has supported its
business momentum by acquiring several entities. Nevertheless,
its impending acquisition of
) is the biggest ever deal for Thermo Fisher, since its inception
in 2006. This deal proves the company's ability to grow via
Life Technologies provides innovative products and services to
customers conducting scientific research and genetic analysis, as
well as in applied markets. The company's revenues totaled $3.8
billion in 2012. According to Thermo Fisher, the successful
completion of this transaction will lead to emergence of an
unrivaled market leader serving research, Specialty Diagnostics
and applied markets. Thermo Fisher also expects this transaction
to help expand its commercial infrastructure and global
Notably, the recent overwhelming approval (in Aug 2013) from
the shareholders of Life Technologies for this impending takeover
came as a sigh of relief for both the companies. This can be
considered as a major boost and a big step forward for the deal
to finally get through. Thermo Fisher expects the transaction to
be completed in early 2014.
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
In addition, 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% revenues
from the high-growth Asia-Pacific region and emerging markets by
Thermo Fisher currently carries a Zacks Rank #3 (Hold).
Better-performing medical devices stocks such as
Align Technologies Inc.,
Mindray Medical International Ltd
), which carry a Zacks Rank #1 (Strong Buy) are worth
ALIGN TECH INC (ALGN): Free Stock Analysis
LIFE TECHNOLOGS (LIFE): Free Stock Analysis
MINDRAY MEDICAL (MR): Free Stock Analysis
THERMO FISHER (TMO): Free Stock Analysis
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