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Analytical Instruments to Aid Thermo Fisher (TMO) Q2 Earnings?

Zacks Equity Research

Thermo Fisher Scientific Inc. TMO is slated to report second-quarter 2019 results on Jul 24, before the opening bell. In the last reported quarter, the company delivered a positive surprise of 2.55%. Moreover, its earnings surpassed estimates in the trailing four quarters, the average being 2.94%.

Which Way Are Estimates Trending?

The Zacks Consensus Estimate for second-quarter earnings is pegged at $3.01, indicating an improvement of 9.45% from the year-ago reported figure.

The same for revenues stands at $6.32 billion, suggesting a 3.95% increase from the prior-year reported number.

Let’s see how things are shaping up prior to this announcement.

Key Catalysts

With respect to the company’s analytical instruments business, higher global demand, sturdy Thermo Scientific brand, substantial impact from the electron microscopy business and a robust volume expansion and productivity are expected to drive this business line in the to-be-reported quarter. The company is expected to register strong growth in Material sciences, which includes the electron microscopy and molecular spectroscopy. New launches like Nicolet Summit FTIR spectrometer within molecular spectroscopy and dioxin analyzer workflow within chromatography and mass spectroscopy should contribute to the company’s top line in the quarter to be reported.

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

On a bearish note, the company is expecting slower growth within its analytical instruments segment in the second half because of more challenging comparisons in the materials science sector.

The Zacks Consensus Estimate for Analytical Instruments revenues is pegged at $1.37 billion, suggesting a 4.4% rise from the year-ago reported figure.

Now turning to the life science solutions business, bioproduction, biosciences and clinical next-generation sequencing businesses are expected to generate solid revenue growth in the second quarter.

Continued uptick in the company’s Ion Torrent line of Next-Gen sequences with the GeneStudio S5 series of benchtop instruments and the introduction of Invitrogen EVOS M5000 digital microscope for cell imaging are likely to contribute to the company’s top line in the to-be-reported quarter.

However, in recent times, this segment faced headwinds from unfavorable business mix and adverse foreign exchange.

The Zacks Consensus Estimate for life science solutions revenues stands at $1.66 billion, implying a 5.5% increase from the year-earlier reported number.

Other Factors Likely to Influence Q2

The company’s focus on bolstering growth through implementation of strategies and consolidation of product offerings is encouraging. These initiatives might in turn, help it report impressive results in the second quarter.

The company’s aim to expand capabilities across the rapidly-growing Asia-Pacific belt and the emerging markets is also likely to enhance its upcoming quarterly results. Outside the United States, the company’s largest market lies in China and it has taken steps to sustain the momentum in this market. We expect the company’s commercial infrastructure to particularly drive strong growth in the soon-to-be-reported quarter.

Moreover, expected growth in the applied markets, such as environmental and food safeties apart from life science is likely to drive the second-quarter results.

Turning to Pharma and Biotech, consistent strength in all the businesses serving this end market along with the wide range and depth of capabilities provided to customer base is likely to boost the company’s performance in the second quarter.

On the back of prudent growth strategy, effective capital deployment, strong analytical instruments business and product portfolio expansion, the company estimates adjusted EPS for 2019 between $12.08 and $12.22 per share, suggesting growth of 9-10% from the year-earlier reported figure.

For 2019, the company expects revenues in the range of $25.17-$25.47 billion, leading to 3-5% projected growth from 2018’s reported figure.

Here’s What the Quantitative Model Predicts:

The proven Zacks model clearly shows that a company with a solid Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has good chances of beating estimates if it also has a positive Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Thermo Fisher has a Zacks Rank #2 and an Earnings ESP of +0.54%. The combination makes us reasonably confident of an earnings beat for the stock this time around.

Other Stocks Worth a Look

Here are a few other stocks worth considering from the broader medical space as these too have the right combination of elements to beat on earnings this reporting cycle.

AmerisourceBergen ABC has an Earnings ESP of +0.67% and a Zacks Rank #2.

DENTSPLY SIRONA XRAY has an Earnings ESP of +6.95% and a Zacks Rank of 1.

Acadia Healthcare Company, Inc. ACHC has an Earnings ESP of +4.30% and is a Zacks #1 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.

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