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Why Is Thermo Fisher (TMO) Down 9.1% Since Last Earnings Report?

Zacks Equity Research

It has been about a month since the last earnings report for Thermo Fisher Scientific (TMO). Shares have lost about 9.1% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Thermo Fisher due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Thermo Fisher Beats on Q4 Earnings on Growth In Major Arms

Thermo Fisher Scientific’s fourth-quarter 2019 adjusted earnings per share of $3.55 beat the Zacks Consensus Estimate by a penny. The figure also improved from the year-ago quarter by 9.2%. On a reported basis, earnings per share was $2.49, increasing 12.2% year over year.

For the full year, adjusted earnings came in at $12.35 per share, ahead of the Zacks Consensus Estimate by 0.2% and also up 11.1% from the year-ago figure. The adjusted figure also surpassed the company’s guided range of $12.28-$12.34.

Revenues in the quarter under review grossed $6.83 billion, up 4.9% year over year. The top line also bettered the Zacks Consensus Estimate by 0.7%.

Full-year revenues of $25.54 billion exceeded the Zacks Consensus Estimate by 0.2% and improved 4.9% from 2018 as well. Further, this exceeded the company’s projected revenue range of $25.34-$25.50 billion for 2019.

Quarter in Detail

Organic revenues in the reported quarter grew 5% year over year while acquisitions, net of a divestiture, increased revenues by 1%. However, currency translation adversely impacted total revenues by a slight 1%.

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 (26.9% of total revenues) improved 8% year over year to $1.84 billion while Analytical Instruments Segment sales (22.2%) dipped 3.2% to $1.52 billion.

Revenues at the Laboratory Products and Services segment (41.5%) rose 9% to $2.83 billion. The Specialty Diagnostics segment (13.8%) recorded marginally flat revenues from compared with the year-ago quarter’s $0.94 billion.

Gross margin of 46.3% during the fourth quarter contracted 60 basis points (bps) year over year despite a 3.6% rise in gross profits. Adjusted operating margin for the quarter came in at 24.7%, reflecting an expansion of 33 bps.

The company exited 2019 with cash and cash equivalents of $2.34 billion compared with $2.29 billion at the end of 2018. Full-year, net cash provided by operating activities was $4.97 billion compared with $4.54 billion a year ago.

2020 Guidance

Full-year revenues are expected in the range of $26.61 billion and $27.01 billion (expected growth of 4% to 6% from 2019). Adjusted earnings per share guidance for 2020 is projected in the range of $13.49 to $13. 67 (9% to 11% growth).

How Have Estimates Been Moving Since Then?

Estimates revision followed a downward path over the past two months.

VGM Scores

Currently, Thermo Fisher has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Thermo Fisher has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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