Will Thermo Fisher Scientific (TMO) Miss Earnings Estimates? - Analyst Blog


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Thermo Fisher Scientific, Inc. ( TMO ) is expected to release its second-quarter 2014 results before the opening bell on Jul 23. Last quarter, Thermo Fisher had posted a positive earnings surprise of 8.51%. The four-quarter trailing average beat is pegged at 3.81%. Let's see how things are shaping up for this announcement.

Factors at Play

Having successfully completed the Life Technologies acquisition in February, Thermo Fisher posted a better-than-expected first-quarter 2014 with adjusted earnings per share of $1.53 and revenues of $3.90 billion, both ahead of the respective Zacks Consensus Estimate of $1.40 and $3.72 billion. The 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. Thermo Fisher also 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.

Taking into consideration the Life Technologies acquisition and related divestitures, in the last reported quarter, Thermo Fisher had raised its fiscal 2014 guidance. Adjusted EPS for the year is expected in the range of $6.80 to $6.95 (implying annualized growth of 25% to 28%), up from the earlier announced range of $6.70 to $6.90 (24% to 27%). The company also expects 2014 revenues in the range of $16.84 to $17.00 billion (annualized growth of 29% to 30%) compared with the earlier band of $16.63 billion to $16.83 billion (growth of 27% to 29% over 2013).

However, for the second quarter, Thermo Fisher had earlier assumed to post an EPS lower than the street number. This, according to the company, is because of some seasonal impact in the said quarter as salary increases have been affected during the period. This may have an impact on the quarterly bottom line.

Earnings Whispers?

Our proven model does not conclusively show that Thermo Fisher is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Thermo Fisher's Earnings ESP is 0.00%, since the Most Accurate estimate of $1.62 is on par with the Zacks Consensus Estimate.

Zacks Rank: Thermo Fisher's Zacks Rank #4 (Sell) when combined with an ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revision momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:  

Hospira Inc. ( HSP ) has an earnings ESP of +1.79% and holds a Zacks Rank #2 (Buy). Hospira is expected to report its second-quarter 2014 earnings on Jul 30.

Cepheid ( CPHD ) has an earnings ESP of +31.58% and bears a Zacks Rank #3 (Hold). Cepheid will be reporting its second-quarter earnings on Jul 17.

Wright Medical Group Inc. ( WMGI ) has an earnings ESP of +2.22% and a Zacks Rank #2 (Buy). Wright Medicalwill report second-quarter earnings on Aug 5.

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HOSPIRA INC (HSP): Free Stock Analysis Report

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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 Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
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