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Thermo Fisher (TMO) End Markets Rebound as COVID-19 Cases Drop

·4 min read

Thermo Fisher Scientific, Inc. TMO is rapidly boosting its inorganic growth profile. The most recent takeover was that of Brammer Bio. Its strong focus on the emerging markets is also encouraging. The stock has a Zacks Rank #3 (Hold).

Thermo Fisher has outperformed its industry in the past year. The stock has rallied 28.3% against the industry’s 0.3% decline.

Thermo Fisher ended the first quarter of 2021 with better-than-expected numbers. The company delivered an outstanding quarterly performance with exceptionally strong year-over-year revenue growth across each of its reporting segments, banking on accelerated growth in Base business on improving pandemic scenario. The Immunodiagnostics business returned to strong growth in the quarter. Demand for COVID-19 testing solutions was very strong. The company generated $2.9 billion of COVID-19 response revenues in the first quarter.

In terms of end market, pharma and biotech registered 35% growth in the first quarter driven by growth across all businesses including bioproduction, pharma services, biosciences, chromatography and mass spectrometry and in research and safety market channel. In academic and government, the company grew 20% driven by robust customer activity globally. In industrial and applied, Thermo Fisher grew in the low double digits driven by strong growth across all of instruments businesses. In diagnostics and healthcare, the company experienced robust demand for COVID-19 testing and was able to deliver 150% growth.

Thermo Fisher Scientific Inc. Price

Thermo Fisher Scientific Inc. Price
Thermo Fisher Scientific Inc. Price

Thermo Fisher Scientific Inc. price | Thermo Fisher Scientific Inc. Quote

In the first quarter, once again Thermo Fisher played a very meaningful role in fighting COVID-19 globally. The company generated $2.9 billion of COVID-19 response revenues in the quarter. Demand for PCR testing solutions was strong. Further, the company played a pivotal role in the development and production of vaccines and therapies. For 2021, Thermo Fisher earlier expected its role in supporting vaccines and therapies to represent $1 billion in revenues. Based on the current flow of orders and capacity expansion speed, the company now expects to deliver $1.5 billion in vaccine and therapy revenues in 2021.

Among significant product launches, the AerosolSense Sampler (a new air monitoring system to help facilities such as hospitals, schools and businesses identify the presence of in-air pathogens, including the virus that causes COVID-19) is to be noted. The company has also acquired Mesa Biotech, which adds simple and rapid PCR testing to decentralized settings, including doctors' offices, pharmacies and to support a number of back-to-life applications. Customer demand is high for the company’s PPI Business System. Thermo Fisher currently expects to generate $200 million in 2021 from these capabilities.

On the flip side, the COVID-19 headwinds impacted each of its end markets in varying degrees. Overall, the company saw significantly reduced customer activity due to work disruptions.

Thermo Fisher’s industrial and applied end market registered slower growth in the first quarter. Customers in this end market were significantly affected by business disruptions due to the pandemic.

Foreign currency fluctuations and competitive landscape are the other major downsides.

Key Picks

A few better-ranked stocks from the broader medical space are Envista Holdings Corporation NVST, Inogen, Inc INGN and IDEXX Laboratories, Inc. IDXX, each carrying a Zacks Rank #2 (Buy). You can see the complete list of Zacks #1 Rank (Strong Buy) stocks here.

Envista Holdings has an estimated long-term earnings growth rate of 26%.

Inogen has an estimated long-term earnings growth rate of 33%.

IDEXX Laboratories has a projected long-term earnings growth rate of 20%.

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