Thermo Fisher Scientific Inc. TMO has been gaining investor confidence on consistently positive results. The stock has rallied 25.2% over the last six months, ahead of the S&P 500’s 8.8% gain and the broader industry’s 12.9% rise.
Moreover, this Massachusetts-based medical instruments manufacturer has a market cap of $77.01 billion. The company’s five-year historical growth rate is favorable at 14.3% compared with 9.4% of the industry.
With solid prospects, this Zacks Rank #2 (Buy) stock is an attractive pick for investors at the moment.
The company has an impressive earnings surprise history, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters with an average beat of 2.3%.
The company’s estimate revision trend for the current year has been positive. In the last 60 days, seven analysts revised their estimates upward, with no movement in the opposite direction. The magnitude of estimate revision for earnings increased around 1.1% to $9.33 per share over the same time frame.
Let’s find out whether the recent positive trend is a sustainable one.
The company has been steadily adding capacities and enhancing existing ones through acquisitions. In this regard, the acquisition of FEI, which has already started generating synergies and contributing largely to the company’s analytical instruments portfolio, has in turn boosted market optimism surrounding the stock. Moreover, we are looking forward to the company’s latest Patheon buyout through which Thermo Fisher forayed into the high-potential contract development and manufacturing organization (CDMO) space.
Moreover, the company plans to continue to strengthen its foothold in emerging markets, such as China and India, and to translate this success to other high-priority opportunities in regions such as South Korea, Russia and Brazil. In the second quarter of 2017, the company recorded solid contributions from China, India and the Middle East. We are also upbeat about the company’s recent opening of a Center of Excellence for electron microscopy in Saudi Arabia.
Additionally, the company has a strong cash balance that enables it to carry out share repurchase programs and in turn provide solid returns to investors. Moreover, we believe the company’s strong cash balance will enable it to carry on with the strategy of inorganic expansion.
On the flip side, Thermo Fisher derives majority of its revenues from the international market, which exposes it to fluctuations in foreign currency. Management currently estimates unfavorable foreign exchange to have a negative impact on its top line in 2017.
Also, a tough competitive landscape continues to pose challenges for the company.
Other Key Picks
Other top-ranked stocks in the medical sector are Abbott ABT, IDEXX Laboratories, Inc. IDXX and Integra LifeSciences Holdings Corporation IART. Abbott, IDEXX Laboratories and Thermo Fisher carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Abbott has a long-term expected earnings growth rate of 10.7%. The stock rallied roughly 34.6% last year.
IDEXX Laboratories has a long-term expected earnings growth rate of 19.8%. The stock gained 43.4% last year.
Integra LifeSciences has a long-term expected earnings growth rate of 10.8%. The stock gained 21.8% last year.
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