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Thermo Fisher (TMO) Beats on Q1 Earnings, Raises '19 View

Zacks Equity Research

Thermo Fisher Scientific Inc.’s TMO first-quarter 2019 adjusted earnings per share (EPS) came in at $2.81, beating the Zacks Consensus Estimate by 2.6%. The figure also improved from the year-ago quarterly figure by 12.4%. On a reported basis, EPS was $2.02, compared with $1.43 in the year-ago quarter.

Revenues in the quarter under review grossed $6.12 billion, up 4.6% year over year. The top line outpaced the Zacks Consensus Estimate of $6.02 billion.

Quarter in Detail

Organic revenues in the reported quarter grew 7% year over year while acquisitions drove revenues by 1%. Currency translation affected total revenues by 3%.

Thermo Fisher operates under four business segments: Life Sciences Solutions, Analytical Instruments, Specialty Diagnostics and Laboratory Products and Services.

Revenues at the Life Sciences Solutions segment (26.3% of total revenues) improved 7% year over year to $1.61 billion while Analytical Instruments Segment sales (21.6%) rose 5% to $1.32 billion.

Revenues at the Laboratory Products and Services segment (41%) rose 4% to $2.41 billion. The Specialty Diagnostics segment (15.7%) recorded a 1% rise to $0.96 billion.

Thermo Fisher Scientific Inc. Price, Consensus and EPS Surprise

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

Gross margin of 46.2% during the first quarter contracted 5 basis points (bps) year over year despite a 4.5% improvement in gross profits. Adjusted operating margin expanded 31 bps to 22.1% on a 6.1% rise in adjusted operating profit.

The company exited the first quarter of 2019 with cash and cash equivalents of $1.10 billion, compared with $2.10 billion in 2018. In the first quarter, net cash provided by operating activities was $649 million compared with $78 million a year ago.

2019 Guidance

Considering the contributions from the company’s newly acquired Brammer Bio and expected impact of more adverse foreign exchange environment, Thermo Fisher has raised its 2019 revenue and earnings guidance.

Revenue guidance has been raised to anew range of $25.17 to $25.47 billion (from the earlier-provided range of $24.88 to $25.28 billion) indicating projected revenue growth in the band of 3% to 5% from 2018. The Zacks consensus Estimate of $25.21 billion remains within but close to the lower end of the guided range.

Adjusted EPS guidance for 2019 has been raised to a new range of $12.08 to $12.22 (from previous range of $12.00 to $12.20) indicating 9% to 10% growth from 2018.

Bottom Line

Thermo Fisher ended the first quarter on a promising note with adjusted earnings and revenues surpassing the consensus mark.

We are encouraged by the launch of a range of new products, including two Thermo Scientific instruments for materials analysis – the Nicolet Summit FTIR spectrometer and the Helios 5 DualBeam scanning electron microscope. Within specialty diagnostics, the company received FDA approval for a new ImmunoCAP test for peanut allergy.

We are also looking forward to the company’s recently-announced agreement to acquire Brammer Bio, a leader in viral vector manufacturing, significantly expanding capabilities in the fast-growing gene and cell therapy market.

Zacks Rank & Other Key Picks

Thermo Fisher has a Zacks Rank #2 (Buy). A few other top-ranked stocks in the broader medical space are Bio-Rad Laboratories, Inc. BIO, ICU Medical Inc. ICUI and Varian Medical Systems, Inc. VAR.

Bio-Rad is scheduled to release first-quarter 2019 results on May 8. The Zacks Consensus Estimate for the quarterly adjusted EPS is pegged at $1.12 and for revenues, stands at $548.8 million. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

ICU Medical is scheduled to release first-quarter 2019 results on May 9. The Zacks Consensus Estimate for the period's adjusted EPS is $2.18 and for revenues, $321.1 million. The stock carries a Zacks Rank #2 (Buy).

Varian is slated to release first-quarter 2019 results on Apr 24. The Zacks Consensus Estimate for the quarterly adjusted EPS stands at $1.16. The consensus estimate for revenues is pegged at $779.01 million. The stock has a Zacks Rank of 2.

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