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Here's Why You Should Buy Thermo Fisher (TMO) Stock Now

Zacks Equity Research

Thermo Fisher Scientific Inc. TMO has been gaining from several sales-building efforts — including product launches and acquisitions. The company also strengthened global capabilities to enhance its unique customer value proposition, which is gaining popularity among customers.

Over the past year, the company’s shares have outperformed its industry. The stock has gained 28.1% compared with 10.2% growth of its industry. Also, Thermo Fisher has outperformed the S&P 500’s 15.4% rise during the same period.

The $123.41-billion medical and laboratory equipment provider is expected to grow at 12.5% in the next five years. Also, the company delivered a positive earnings surprise of 1.9%, on average, over the trailing four quarters. It is expected to scale new highs in the near term.

Let’s delve deeper into the factors, which indicate that the Zacks Rank #2 (Buy) company is a worthy investment choice right now.



Factors Driving the Stock

Product Launches: Investors are upbeat about Thermo Fisher’s slew of product launches that include TSQ Altis, Quantis MD mass spectrometers and Vanquish MD HPLC for clinical diagnostic laboratories. Investors are optimistic about the company’s broadening global market reach, with a Biosciences Customer Exploration Center in Shanghai and an expansion of a clinical trials logistics facility in Suzhou.

Further, Thermo Fisher launched a scalable bioreactor workflow called Thermo Scientific TruBio Discovery Automation System. The system establishes connections between bioreactors, controllers and software for easy data transfer.

Acquisitions: Investors are upbeat about the company’s slew of acquisitions, the recent one being of an active pharmaceutical ingredient manufacturing facility of GlaxoSmithKline in Cork, Ireland. The site produces complex Active Pharmaceutical Ingredients used to treat diseases, including childhood cancers, depression and Parkinson’s. This apart, acquisitions of HighChem (a small business that expands Thermo Fisher’s mass spectrometry software offerings) and Brammer Bio (provides treatment options in gene and cell therapies to patients with rare diseases) buoy optimism.

End Market Growth: The company registered robust growth in the pharma and biotech segments in third-quarter 2019. The diagnostics and healthcare segments also performed well on strong growth in transplant diagnostics and immunodiagnostics. Also, the company is witnessing strong market adoption of its Gibco Cell Culture for Bioprocessing, Chromatography and Protein Purification.

Raised Guidance: Investors are optimistic as the company recently raised guidance for 2019. It also raised revenue projection to $25.34-$25.50 billion from $25.30-$25.50 billion mentioned earlier, indicating revenue growth of 4-5% from the figure reported in 2018.

The company raised adjusted earnings per share (EPS) guidance for 2019 to $12.28-$12.34 (compared with previously mentioned $12.16 to $12.26), suggesting 10-11% growth from the figure reported in 2018. This indicates that the company will be able to maintain its ongoing bullish momentum throughout the rest of the year.

Which Way Are Estimates Heading?

Thermo Fisher is witnessing an impressive estimate revision trend for the current year. Over the past 60 days, the Zacks Consensus Estimate for its earnings has moved 0.7% north to $12.33.

The Zacks Consensus Estimate for the company’s 2019 revenues is pegged at $25.50 billion, suggesting 4.7% rise from the year-ago reported number.

Other Key Picks

Some other top-ranked stocks from the broader medical space are Haemonetics Corporation HAE, National Vision Holdings, Inc EYE and ResMed Inc RMD.

Haemonetics, currently flaunting a Zacks Rank #1 (Strong Buy), has a projected long-term earnings growth rate of 13.5%.

National Vision’s long-term earnings growth rate is estimated at 17.8%. The company currently has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

ResMed’s long-term earnings growth rate is estimated at 12.9%. It currently carries a Zacks Rank #2.

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