Thermo Fisher Guidance Is Weak, Analyst Concerned About Sluggish Market Fundamentals

KeyBanc Capital Markets analyst Paul Knight downgraded Thermo Fisher Scientific Inc TMO to Sector Weight from Overweight.

Yesterday, TMO posted Q3 revenue of $10.574 billion, down 1% Y/Y, missing the consensus of $10.595 billion. Adjusted EPS of $5.69 beat the consensus of $5.61. 

Given the current macroeconomic environment, the company lowered the outlook for FY23 revenue to $42.7 billion (prior $43.4 billion - $44.0 billion) vs. $43.53 billion consensus and adjusted EPS to $21.50 (prior $22.28 - $22.72) vs. $22.31 consensus.

The analyst notes management's concern about broad-based cash conservatism from biotech customers, incremental weakness in China, possible destocking, and overall industry decline.

The analyst reduced estimates for revenue and EPS to $42.70 billion (from $43.65 billion earlier, vs. consensus $43.359 billion) and $21.50 (from $22.33 earlier) for FY23. 

Knight cut the estimates for revenue to $42.70 billion (from $47.35 billion vs. consensus $45.043 billion) and EPS to $21.75 from $24.55 for FY24. 

The analyst doesn't see near-term visibility with significant COVID headwinds expected to continue through FY24, weak funding environment for emerging biotechs, cash conservatism from large pharma customers, and a slowdown in China pharma markets.

Also, Morgan Stanley lowered the price target to $545 from $600 and maintained an Overweight rating. 

Raymond James analyst cut the price target to $515 from $580 and reiterated the rating at Outperform.

Citigroup reduced the price target to $530 from $625 and kept the Buy rating.

Price Action: TMO shares are trading higher by 2.02% at $441.79 on the last check Thursday.