Thermo Fisher (TMO) to Report Q3 Earnings: What's in Store?

Thermo Fisher Scientific Inc. TMO is slated to release third-quarter 2020 results on Oct 21, before market open.

In the last reported quarter, the company’s earnings of $3.89 per share exceeded the Zacks Consensus Estimate by 45.7%. Its earnings surpassed estimates in the trailing four quarters, the average surprise being 13.4%.

Let's discuss the factors that are likely to get reflected in the upcoming results.

Factors at Play

In the last reported quarter, Thermo Fisher’s Analytical Instruments segment’s performance was dull due to a significant negative impact of COVID-19. The pandemic has massively disrupted the global supply chain. Hence, given its huge international base and the tough international trade scenario throughout the third quarter, Thermo Fisher is once again expected to have recorded a fall in its quarterly Analytical Instruments revenues.

However, several new product launches within this segment, including two new Orbitrap Exploris instruments to advance biotherapeutic research, are expected to contribute to the third-quarter top line. Also, the launch of Labtainer Pro BioProcess Container within its bioproduction business is likely to have accelerated the production of new therapies and vaccines.

Thermo Fisher Scientific Inc. Price and EPS Surprise

Thermo Fisher Scientific Inc. Price and EPS Surprise

Thermo Fisher Scientific Inc. price-eps-surprise | Thermo Fisher Scientific Inc. Quote

The company’s Life-Science Solutions and Specialty Diagnostics segments are expected to have registered positive contributions, banking on COVID-19-led growing healthcare needs. Life-Science Solutions is mainly related to testing kits. With the EUA for its COVID-19 PCR test earlier this year, we expect the segment to have recorded full-quarter sales contribution.

Further, this test received the CE mark in the European Union. Europe, being another major virus-affected continent, is anticipated to have generated strong demand for this test during the third quarter. In addition, this diagnostic test received designated approvals in Canada, Singapore, India, Australia and New Zealand. Thermo Fisher has ramped up production to meet this growing global demand. Its third-quarter results are expected to reflect these developments.

Meanwhile, in early September, the company announced the opening of its new Bioprocessing Collaboration Center (BCC) in Missouri. This too is expected to have potentially increased production capacity of bioprocessing technologies, including bioreactors, cell culture media, chromatography and analytical tools, in the third quarter.

Also, in early September, the company announced an investment of more than $140 million to increase the production of its laboratory plastic consumables. This comes as a measure to combat the historic increase in the global demand not only for COVID-19 testing but also for the development and manufacturing of therapies and vaccines. This too is expected to have somewhat contributed to the third-quarter results.

In the last reported quarter, part of the Specialty Diagnostics business was down as a result of a decrease in doctor visits and related testing. Most affected were the immunodiagnostics and transplant diagnostics businesses. With the on-and-off resurgence of new COVID-19 cases through the third quarter across several regions of the United States, we expect this scenario to mostly remain unchanged. However, strong growth is expected in the healthcare market channel and the clinical diagnostics and microbiology businesses.

We note that, inearly May, Thermo Fisher received a contract from the U.S. government to provide a significant quantity of highly specialized viral transport media (VTM) for COVID-19 sample collection. In response to that, it opened a $40-million facility in Lenexa, KS, dedicated to viral transport media (VTM) production in July. Per its August update, it ramped up production in Lenexa from 50,000 units per week to more than 8 million per week. This too is expected to have significantly contributed to the company’s third-quarter Specialty Diagnostics top line.

Within the Laboratory Products and Services segment, the company is expected to have gained from strong productivity and volume leverage within the pharma services business and the research and safety market channel.

Q3 Estimates

The Zacks Consensus Estimate for total revenues of $7.74 billion for the third quarter suggests growth of 23.5% from the prior-year quarter’s reported figure. The consensus mark for earnings of $4.37 per share indicates a 48.6% rise from the year-ago quarter’s reported figure.

What Our Quantitative Model Predicts

Our proven model does not conclusively predict an earnings beat for Thermo Fisher this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Earnings ESP: Thermo Fisher has an Earnings ESP of -0.34%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently sports a Zacks Rank #1.

Stocks Worth a Look

Here are three medical stocks worth considering from the same space with the right mix of elements to surpass expectations this earnings season.

Humana Inc. HUM currently has a Zacks Rank #2 and an Earnings ESP of +3.35%. The company is scheduled to report third-quarter 2020 earnings on Nov 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

DaVita Inc. DVA has an Earnings ESP of +2.88% and a Zacks Rank of 1, at present. The company is slated to release third-quarter 2020 numbers on Nov 3.

LHC Group LHCG has an Earnings ESP of +1.85% and a Zacks Rank of 2, at present. The company is slated to release third-quarter 2020 numbers on Nov 4.

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