It has been about a month since the last earnings report for Thermo Fisher Scientific (TMO). Shares have added about 4.8% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Thermo Fisher due for a pullback? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Thermo Fisher Beats on Q1 Earnings on Growth In Life Sciences
Thermo Fisher’s first-quarter 2020 adjusted earnings per share of $2.94 beat the Zacks Consensus Estimate by 5.4%. The figure improved 4.6% year over year.
The adjusted number excludes certain non-recurring expenses, QIAGEN acquisitioncosts and certain restructuring costs, net, consisting principally of severance, abandoned facility and other expenses of headcount reductions within several businesses and real estate consolidation.
On a reported basis, earnings per share were $1.97, down 2.5% year over year.
Revenues in the quarter under review grossed $6.23 billion, up 1.6% year over year. The top line also exceeded the Zacks Consensus Estimate by 0.4%.
Quarter in Detail
Organic revenues in the reported quarter grew 2% year over year while acquisitions, net of a divestiture, increased revenues by 1%. However, currency translation adversely impacted total revenues by 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 (28.5% of total revenues) improved 10% year over year to $1.77 billion while Analytical Instruments Segment sales (17.7%) declined 16.7% to $1.1 billion.
Revenues at the Laboratory Products and Services segment (43.8%) rose 9% to $2.73 billion. The Specialty Diagnostics segment (15.4%) recorded flat year-over-year revenues at $0.96 billion.
Gross margin of 45.9% in the first quarter contracted 25 basis points (bps) year over year despite a 1.2% rise in gross profits. Adjusted operating margin for the quarter came in at 21.9%, reflecting an expansion of 12 bps.
The company exited the first quarter of 2020 with cash and cash equivalents of $2.98 billion compared with $2.39 billion at the end of 2019. Net cash provided by operating activities in the first quarter was $356 million compared with $649 million a year ago.
We note that on Apr 6, 2020, Thermo Fisher had withdrawn its 2020 guidance due to the COVID-19 pandemic-led crisis and related customer impact.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
Currently, Thermo Fisher has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren’t focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Thermo Fisher has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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