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Thermo Fisher (TMO) Down on Business Divestment Declaration

Zacks Equity Research

Shares of Thermo Fisher Scientific Inc. TMO slipped 1.25% at yesterday’s close following the company’s announcement of its plans to divest its Anatomical Pathology business. PHC Holdings, a Japanese healthcare company, has agreed to buy this business for a cash consideration of $1.14 billion.

Thermo Fisher expects this transaction to close in the second quarter of 2019, subject to customary closing conditions and applicable regulatory approvals.

Notably, the Anatomical Pathology business of Thermo Fisher comes under its Specialty Diagnostics segmentthat serves customers in healthcare and clinical laboratories. Last year, this segment contributed more than 15% to the company’s top line. Over the past year, this segment had steadily generated positive revenue growth.

Thermo Fisher Scientific Inc. Price

Thermo Fisher Scientific Inc. Price | Thermo Fisher Scientific Inc. Quote

The Anatomical Pathology subsegment provides microscope slides, instruments and consumables. It has approximately 1,200 employees at locations across the United States, Europe and China. The business generates approximately $350 million in annual revenues.

Financial Impact of the Deal

Thermo Fisher expects the net dilution of this divestment to 2019 adjusted earnings per share to be approximately 10 cents. The company is going to incorporate this into its 2019 financial guidance that will be provided during the first-quarter 2019 earnings call, scheduled on Jan 30.

Price Performance

Over the past year, the company’s share price has outperformed its industry. The stock has gained 10.8% compared with the industry’s 2% rise.

Zacks Rank and Key Picks

Thermo Fisher carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader medical space are Omnicell, Inc. OMCL, Amedisys, Inc. AMED and Illumina, Inc. ILMN.

Omnicell’s long-term earnings growth rate is estimated at 11.8%. The stock flaunts a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Amedisys’ long-term earnings growth rate is projected at 18.8%. The stock carries a Zacks Rank of 2.

Illumina’s long-term earnings growth rate is expected at 20.9%. The stock is a Zacks #2 Ranked player.

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