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Thermo Fisher (TMO) Beats on Q3 Earnings, Ups '18 Guidance

Thermo Fisher Scientific Inc.TMO reported better-than-expected performance in third-quarter 2018. Adjusted earnings per share (EPS) came in at $2.62, beating the Zacks Consensus Estimate by 2.7% and the year-ago quarterly figure by 13.4%. On a reported basis, the EPS of $1.75 marked an 30.6% increase year over year.

Revenues in the quarter under review logged $5.92 billion, up 15.6% year over year. The top line also outpaced the Zacks Consensus Estimate of $5.70 billion.

Quarter in Detail

Organic revenues in the reported quarter grew 10% year over year while acquisitions drove revenues by 7%. Currency translation negatively influenced total revenues by 1%.

Thermo Fisher Scientific Inc. Price, Consensus and EPS Surprise

Thermo Fisher Scientific Inc. Price, Consensus and EPS Surprise | Thermo Fisher Scientific Inc. Quote

Thermo Fisher operates under four business segments: Life Sciences Solutions, Analytical Instruments, Specialty Diagnostics and Laboratory Products and Services.

Revenues at the Life Sciences Solutions segment (25.3% of total revenues) improved 9% year over year to $1.50 billion while Analytical Instruments Segment sales (22.4%) rose 12% to $1.33 billion.

Revenues at the Laboratory Products and Services segment (41.7%) surged 28% to $2.47 billion, banking on the buyout of Patheon in August 2017. The Specialty Diagnostics segment (15%) recorded an 6% rise to $0.84 billion.

Gross margin of 46,3% during the third quarter was down 125 basis points (bps) year over year despite an 12.7% improvement in gross profits. Adjusted operating margin expanded 96 bps to 22.2% on a 20.9% rise in adjusted operating profit.

The company exited the third quarter of 2018 with cash and cash equivalents of $1.09 billion compared with $937 million at the end of the second quarter. Year-to-date, net cash provided by operating activities was $2.74 billion compared with $2.14 billion in the year-ago period.

2018 Guidance

Based on a solid third-quarter operational performance partially offset by less favorable foreign exchange, Thermo Fisher has raised its full-year 2018 revenue guidance to a band of $23.99-$24.09 billion (compared with the company's earlier predicted band of $23.68-$23.86 billion), a 15% growth over 2017. The Zacks Consensus Estimate of $23.85 billion remains below the guided range.

Adjusted EPS view has been lifted to a new range of $11.00-$11.06 (compared with the previous forecast of $10.89-$11.01), reflecting 16-17% growth from the year-ago period.The Zacks Consensus Estimate of $10.99 per share falls below the company's view.

Bottom Line

Thermo Fisher ended the third quarter on a promising note with both adjusted earnings and revenues surpassing the consensus mark.

We are encouraged by the company's solid international performance with strong year-over-year growth in Asia-Pacific and the emerging markets including China.

Also, a series of product launches along with major progress in precision medicine initiatives aided the company's performance. In the quarter under consideration, the company launched a suite of new instruments for life sciences and specialty diagnostics including Invitrogen EVOS M5000 cell imaging system, Phenom Pharos benchtop scanning electron microscope and the Phadia 200 allergy and autoimmune system in Europe. Also, we are looking forward to the company's plans to acquire Advanced Bioprocessing business from Becton Dickinson. The acquisition will add complementary cell culture products to Thermo Fisher's bioproduction offerings.

Zacks Rank & Key Picks

Thermo Fisher currently carries a Zacks Rank #3 (Hold). A few top-ranked stocks in the broader medical space are Amedisys, Inc. AMED , Baxter International Inc BAX andMasimo Corporation MASI .

Amedisys is expected to release third-quarter 2018 results on Oct 29. The Zacks Consensus Estimate for adjusted EPS is 79 cents and for revenues $410.2 million. The stock carries a Zacks Rank of 1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Baxter is expected to release third-quarter 2018 results on Oct 31. The Zacks Consensus Estimate for the quarter's EPS is pegged at 74 cents and for revenues at $2.79 billion. The stock sports a Zacks Rank #2 (Buy).

Masimo Corporation is slated to release third-quarter 2018 results on Oct 31. The Zacks Consensus Estimate for EPS is pinned at 68 cents and for revenues at $206.3 million. The stock is a Zacks #2 Ranked player.

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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.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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