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What's in the Offing for Thermo Fisher (TMO) in Q1 Earnings?

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Thermo Fisher Scientific Inc. TMO is slated to report first-quarter 2018 results before the market opens on Apr 25. Last quarter, the company delivered a positive earnings surprise of 4.89%. Moreover, Thermo Fisher has surpassed estimates in all the trailing four quarters with an average beat of 3.08%.

Let's see, how things are shaping up for this announcement.

Key Catalysts

Thermo Fisher has been going strong across its analytical instrument businesses with increasing global demand. Particularly, the company’s acquisition of FEI has been largely contributing to its analytical instruments portfolio over the past year. The buyout has enabled Thermo Fisher to access FEI’s industry leading high-performance electron microscopy platform used for protein study as well as facilitating life-science research. This is also a vital highlight of the quarter to be reported.

Thermo Fisher anticipates realizing total synergies of approximately $80 million by the end of three years following the deal’s closure with about $55 million of cost synergies and roughly, $25 million of adjusted operating income benefits from revenue-related synergies.

Thermo Fisher Scientific Inc. Price and EPS Surprise

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


Following the completion of the deal, the company has launched a host of products and expanded its Thermo Scientific Helios G4 DualBeam platform within the scope of material science applications. This should also get reflected in first-quarter 2018 performance.

Apart from FEI-related development, another notable unveiling in the company’s Analytical Instruments business is its new line of Thermo Scientific air-quality monitors called the iQ Series. This platform includes mobile applications for remote monitoring and control as well as wireless connectivity and enhanced services. This in turn is likely to contribute to the company’s top line in the yet-to-be-reported quarter.

Overall, the Waltham MA-based company is gearing up for yet another quarter of strong analytical instruments segmental growth. In the period to be reported, Thermo Fisher expects to see a positive impact from the electron microscopy business as well as a robust volume expansion plus productivity.

The Zacks Consensus Estimate for Analytical Instruments revenues is pegged at $1.138 billion, higher than the year-ago figure of $1.05 billion.

Here are other factors that might influence Thermo Fisher’s first-quarter results:

The company’s focus to boost growth through implementation of strategies and consolidating its product offerings is encouraging. These initiatives are likely to help it post impressive results in the first quarter.

The company had spent $900 million on research and development in 2017 and the same trend is continuing through 2018. We expect all innovations and product introductions to substantially drive the company’s top line in the first quarter itself.

The company’s aim to expand capabilities in the fast-growing Asia-Pacific zone as well as the emerging markets should also leads to solid results. Recent standout contributors are China, India and South Korea. With strategic investments to support key customer applications, Thermo Fisher forecasts to maintain a bullish momentum for 2018.

Moreover, growth is estimated in applied markets such as environmental and food safeties apart from life science. In addition, the company is betting on some key areas under focus with enormous opportunities at its disposal including advancing precision medicines from mass spectrometry to the targeted gene sequencing and structural biology. 

However, we are apprehensive about Thermo Fisher facing a foreign exchange headwind on 2018 revenues and adjusted EPS. Also, a hostile macroeconomic condition continues to weigh heavily on the stock. Plus, stiff competition consistently poses challenges to the stock’s value.

Here’s What the Quantitative Model Predicts:

Per the proven Zacks model, a company with a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has good chances of beating estimates if it also has a positive Earnings ESP.

Thermo Fisher has a Zacks Rank #3, which increases the predictive power of ESP and an Earnings ESP of -1.29%, which leaves surprise prediction inconclusive. This is because a company needs positive ESP to be confident about an earnings surprise. Thus this combination does not suggest that the stock is likely to beat on earnings this quarter.

We caution against the Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are a few medical stocks worth considering with the right combination of elements to outpace expectations this time around:

Myriad Genetics, Inc. MYGN has an Earnings ESP of +0.61% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Henry Schein, Inc. HSIC has an Earnings ESP of +3.34% and a Zacks Rank of 3.

Quest Diagnostics Incorporated DGX has an Earnings ESP of +3.19% and is a Zacks #3 Ranked player.

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Thermo Fisher Scientific Inc. (TMO) : Free Stock Analysis Report
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