Thermo Fisher (TMO) Q2 Earnings Top Estimates, Margins Down
Thermo Fisher Scientific Inc.'s TMO second-quarter 2022 adjusted earnings per share (EPS) of $5.51 beat the Zacks Consensus Estimate by 11.9%. The figure however declined 1.6% year over year.
The adjusted number excludes certain non-recurring expenses, including asset amortization costs and certain restructuring costs.
GAAP EPS was $4.22, reflecting an 8.5% drop on a year-over-year basis.
Revenues in Detail
Revenues in the quarter under review grossed $10.97 billion, up 18% year over year. The top line exceeded the Zacks Consensus Estimate by 11.5%.
Segment Details
Organic revenues in the reported quarter rose 3% year over year, while currency translation lowered revenues by 4%. Core organic revenue growth (considering the impact of PPD revenue, excluding the impacts of COVID-19 testing revenue) was 13%.
Thermo Fisher operates under four business segments — Life Sciences Solutions, Analytical Instruments, Specialty Diagnostics, and Laboratory Products and Biopharma Services.
Thermo Fisher Scientific Inc. Price, Consensus and EPS Surprise
Thermo Fisher Scientific Inc. price-consensus-eps-surprise-chart | Thermo Fisher Scientific Inc. Quote
Revenues at the Life Sciences Solutions segment (30% of total revenues) declined 7.5% year over year to $3.29 billion while Analytical Instruments Segment sales (14.6%) improved 8.5% to $1.61 billion.
Revenues at the Laboratory Products and Biopharma Services segment (50.5%) rose 54.4% to $5.54 billion. The Specialty Diagnostics segment (10%) however recorded a 10.9% year-over-year fall in revenues to $1.1 billion.
Margin Analysis
The gross margin of 43.1% in the second quarter contracted 744 basis points (bps) year over year on a 36.1% rise in the cost of revenues.
In the quarter, selling, general and administrative expenses increased 7.8% to $1.74 billion. Research and development expenses were $365 million, up 6.4% year over year.
The adjusted operating margin for the quarter came in at 23.9%, reflecting a contraction of 552 bps.
Financial Position
The company exited the second quarter of 2022 with cash and cash equivalents of $1.89 billion compared with $2.75 billion at the end of Q1.
Cumulative net cash provided by operating activities was $3.73 billion compared with $4.21 billion a year ago.
Thermo Fisher has a consistent dividend-paying history, with the five-year annualized dividend growth being 15.4%.
Guidance
The company stated that it will come up with its updated 2022 financial guidance on its earnings conference call.
Our Take
Thermo Fisher exited the second quarter with better-than-expected results. The robust year-over-year revenue growth in the Analytical Instruments and the Laboratory Products and Biopharma Services segments appears promising.
However, the year-over-year decline in revenues in the Life Science Solutions and Specialty Diagnostics segment is disappointing. The contraction of both margins on escalating costs and expenses does not bode well either. The year-over-year decline in adjusted earnings is concerning.
Zacks Rank and Key Picks
Thermo Fisher currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Quest Diagnostics Incorporated DGX, Medpace Holdings, Inc. MEDP and Neogen Corporation NEOG.
Quest Diagnostics, carrying a Zacks Rank #2 (Buy), reported second-quarter 2022 adjusted EPS of $2.36, which beat the Zacks Consensus Estimate by 9.8%. Revenues of $2.45 billion outpaced the consensus mark by 7.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Quest Diagnostics has an earnings yield of 7.2% compared with the industry’s 3.3%. DGX’s earnings surpassed estimates in three the trailing four quarters and missed the same in one, the average being 12.1%.
Medpace Holdings, having a Zacks Rank #2, reported second-quarter 2022 adjusted EPS of $1.46, which beat the Zacks Consensus Estimate by 8.9%. Revenues of $351.2 million outpaced the consensus mark by 1.3%.
Medpace Holdings has an estimated growth rate of 22.7% for full-year 2022. MEDP’s earnings surpassed estimates in the trailing four quarters, the average being 17.3%.
Neogen reported fourth-quarter fiscal 2022 adjusted EPS of 18 cents, which surpassed the Zacks Consensus Estimate by 12.5%. Fiscal fourth-quarter revenues of $140.1 million outpaced the Zacks Consensus Estimate by 1.3%. It currently has a Zacks Rank #2.
Neogen has an estimated growth rate of 1.6% for fiscal 2023. NEOG’s earnings surpassed estimates in two of the trailing four quarters, lagged the same in one and broke even in the other, the average surprise being 1.5%.
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