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Thermo Fisher Fundamentals Impressive Amid Tough Competition

Zacks

On Sep 14, we issued an updated research report on Thermo Fisher Scientific, Inc. TMO, a leading scientific instrument maker. The stock currently carries a Zacks Rank #2 (Buy).

Over the past three months, Thermo Fisher has been trading above the broader industry. Per the last trading price, the stock has gained 9.6%, higher than the broader market’s gain of 1.9% over that time frame. The company continues to see strong growth in pharma and biotech backed by solid market fundamentals and planned growth strategy. The raised 2017 guidance is also encouraging.

The company’s acquisition activities to drive growth inorganically also raise hopes. We are particularly upbeat about the company’s foray into the into the high-potential contract development and manufacturing organization (CDMO) space through the recent acquisition of Patheon N.V. for $7.2 billion. Moreover, the takeover of FEI Company has started to contribute to Thermo Fisher’s analytical instruments portfolio. A few of the company’s other strategic purchases are Finesse Solutions and Alfa Aesar.


Meanwhile, this Waltham, MA-based company plans to continue to strengthen its foothold in emerging markets, such as China and India, and to translate this success to other high-priority opportunities in regions such as South Korea, Russia and Brazil. In the second quarter of 2017, the company recorded solid contributions from China, India and the Middle East. We are also upbeat about the company’s recent opening of a Center of Excellence for electron microscopy in Saudi Arabia.

Additionally, Thermo Fisher has a strong cash balance that enables it to adopt attractive share repurchase programs and in turn provide solid returns to investors.

On the flip side, Thermo Fisher derives majority of its revenues from the international market, which exposes it to fluctuations in foreign currency. Management currently estimates unfavorable foreign exchange to have a negative impact on its top line in 2017.

The landscape has become intensely competitive, thanks to changing technology and customer demand that require continual research and development.

Other Key Picks

A few other top-ranked medical stocks are Edwards Lifesciences Corporation EW, Lantheus Holdings, Inc. LNTH and IDEXX Laboratories, Inc. IDXX. Edwards Lifesciences sports a Zacks Rank #1 (Strong Buy), while Lantheus Holdings and IDEXX carry a Zacks Rank #2 each. You can see the complete list of today’s Zacks #1 Rank stocks here.

Edwards Lifesciences has a long-term expected earnings growth rate of 15.2%. The stock has rallied roughly 20% over the last six months.

Lantheus Holdings has a long-term expected earnings growth rate of 12.5%. The stock has gained 40.7% over the last six months.

IDEXX has a long-term expected earnings growth rate of 19.8%. The stock has gained around 45% over the last year.

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