Thermo Fisher Scientific Inc. TMO is making robust progress with its growth strategy, which bodes well for the upcoming quarters. The spree of innovative product introductions bolsters its portfolio. The company’s Bioproduction business is expanding and increasing its capacity to meet the rising demand. Meanwhile, the adverse macroeconomic impacts and currency fluctuations raise concerns for TMO’s operations,
In the past year, shares of this Zacks Rank #3 (Hold) company have rallied 20.7% compared with the 20.8% rise of the industry and the S&P 500 composite’s gain of 32.2%.
The renowned medical and laboratory equipment provider has a market capitalization of $228.67 billion. With an earnings yield of 3.63%, it significantly outperforms the industry’s -5.38%. The company’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 3.9%.
Let’s take a closer look.
Upsides for TMO
Growth Strategy Looks Promising: Thermo Fisher’s growth strategy consists of three pillars — developing high-impact, innovative new products, leveraging scale and high growth in emerging markets, and delivering a unique value proposition to the customers. In recent times, the company launched several new products, such as the Thermo Scientific LInspector EdgeIn-line metrology solution, the TruScan G3 Handheld Raman Analyzer as well as Applied Biosystems Axiom BloodGenomiX Array and Software.
Thermo Fisher’s strong partnerships with its customers provide an early insight into their unmet needs, helping bring industry-leading products, services and expertise in ways unmatched by competitors. It partnered with Bayer to develop a next-generation sequencing-based companion diagnostic for identifying patients suited for Bayer's precision cancer therapies. Meanwhile, Thermo Fisher actively utilizes Generative AI as part of the PPI business system to increase efficiency and productivity, as well as improve the customer experience across the company continually.
Impressive Product Launches: The company has been expanding its product lineup with a slew of launches. In the second quarter, it introduced Thermo Scientific KingFisher PlasmidPro Maxi Processor (PlasmidPro), which enables innovation at scale, providing complete automation across mini and maxi-scale purification. At the American Society for Mass Spectrometry Conference, the company introduced the Thermo Scientific Stellar Mass Spectrometer, furthering its leadership in proteomics.
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In the bioproduction business, the company launched a first-of-its-kind bio-based film for single-use technologies. Within the laboratory products business, Thermo Fisher launched a new line of Energy Star-certified Thermo Scientific TSX universal series ULT freezers. Earlier in March 2024, Thermo Fisher unveiled its new metrology solution designed to address the needs of the rapidly growing battery market.
Bioproduction Business on the Rise: Thermo Fisher’s Gibco Cell Culture products for Bioprocessing, Chromatography and Protein Purification are currently in high demand, particularly for the mRNA manufacturing process. The company’s manufacturing sites in China and Singapore support the enhancement of capacity for single-use technology, intended to meet both the local and global demand from biopharma customers. In South Korea, it continues to enhance regional capabilities with customer-focused innovation centers for the semiconductor industry and biopharma customers.
In June 2024, the Thermo Scientific Heracell VIOS 250i AxD CO2 Incubators were launched to support the future implementation of workflow automation in cell therapy production. In April 2024, the company introduced the Gibco CTS OpTmizer One Serum-Free Medium (CTS OpTmizer One SFM) — a novel animal origin-free formulation designed specifically for clinical and commercial cell therapy manufacturing to deliver increased scalability and performance of T cell expansion.
Thermo Fisher’s Key Concerns
Macroeconomic Challenges Continue to Weigh on the Stock: Ongoing macroeconomic conditions, including disruptions in economic activity, global supply chains and labor markets, are creating a challenging business environment for Thermo Fisher. Significant volatility in price and availability of goods and services are adding pressure on the company’s profitability. With sustained macroeconomic pressures, TMO may struggle to keep its operating expenses in check. In the second quarter of 2024, the company’s selling, general and administrative expenses rose 13.5% year over year.
Exposure to Foreign Currency: Thermo Fisher’s international sales make up a substantial portion of its revenues, exposing the company to risks from foreign exchange fluctuations. As overseas sales grow, exposure to fluctuations in currency exchange rates could have a larger effect on its financial results.
TMO Stock Estimate Trend
The Zacks Consensus Estimate for the company’s 2024 earnings per share (EPS) has remained constant at $21.72 in the past 30 days.
The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $42.85 billion, implying a negligible 0.02% year-over-year decline.
Top MedTech Picks
Some better-ranked stocks in the broader medical space are TransMedix Group TMDX, AxoGen AXGN and Phibro Animal Health PAHC. While TransMedix Group currently sports a Zacks Rank #1 (Strong Buy), AxoGen and Phibro Animal Health each carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
TransMedix Group’s earnings are expected to surge 258.4% in 2024. Its shares have rallied 189.3% compared with the industry’s 20.8% growth in the past year. TMDX’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 287.5%.
AxoGen has an estimated 2024 earnings growth rate of 94.1% compared with the industry’s 13.6%. Shares of the company have surged 212.1% compared with the industry’s 20.7% growth in the past year. AXGN’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 96.5%.
Phibro Animal Health has an estimated fiscal 2025 earnings growth rate of 21% compared with the industry’s 12.5% growth. Shares of the company have rallied 73.7% compared with the industry’s 24.4% growth in the past year. PAHC’s earnings surpassed estimates in three of the trailing four quarters and missed on one occasion, the average surprise being 4.1%.
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