Reasons to Retain Thermo Fisher in Your Portfolio Now

Thermo Fisher Scientific Inc. TMO is gaining investors' confidence due to its impressive partnerships. Of late, the company has launched a slew of products to enhance its portfolio. However, declining COVID-19 testing-related demand, as well as adverse macroeconomic impacts might deter Thermo Fisher's growth. 

Year to date, this Zacks Rank #3 (Hold) company's shares have rallied 15.7% compared with 7.8% growth of the industry. The S&P 500 composite has risen 17.6% during the said time frame.

The renowned medical and laboratory equipment provider has a market capitalization of $234.75 billion. TMO has had an impressive 14.3% improvement over the past five years, outperforming the industry's 10.2% growth.

The company's earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 3.98%.

Let's delve deeper.

Upsides

New Partnerships Expand Business: Thermo Fisher continues to expand business banking on strategic alliances. During the second quarter, the company advanced its partnerships in the Asia Pacific region. These included one with the National Battery Research Institute in Indonesia to advance battery technology and energy storage, and another with the Mandaya Hospital Group in Indonesia to help advance stem cell research and cell therapy development.

Thermo Fisher also expanded its partnership in Singapore with the National University Hospital. In March this year, the company collaborated with Bayer AG to develop next-generation sequencing-based companion diagnostic assays (CDx).

Impressive Product Launch: In May 2024, Thermo Fisher Scientific One Lambda Laboratories introduced a new CXCL10 testing service, which allows for non-invasive urine sample collection and testing. In April 2024, TMO unveiled its new metrology solution — the Thermo Scientific LInspector Edge In-line Mass Profilometer — to address the needs of the rapidly growing battery market.

During the American Society for Mass Spectrometry Conference in the second quarter of 2024, the company introduced the Thermo Scientific Stellar Mass Spectrometer, which extends Thermo Fisher's leadership in proteomics. Additionally, the company launched three new build-for-purpose editions of the Thermo Scientific Orbitrap Ascend Tribrid Mass Spectrometer.

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Within the bioproduction business, the company launched a first-of-its-kind bio-based film for single-use technologies. These new bioprocess containers use plant-based materials in place of fossil fuel to provide lower carbon solutions for the manufacturer of biologics. TMO also launched a new line of Thermo Scientific TSX universal series ULT freezers. In recent years, the company has gradually ramped up its R&D investments.

Downsides

Macroeconomic Challenges Continue to Weigh on the Stock: The challenging macroeconomic scenario and slower economic recovery in China continue to hurt Thermo Fisher's growth. The company has been witnessing headwinds in the government and academic markets. Moreover, many countries in Europe are also going through a tough time that might negatively impact their academic budgets. Thermo Fisher remains cautious since its growth could further moderate if the economic scenario worsens.

Lower COVID-19 Sales Hurt Growth: During the COVID-19 pandemic, TMO's biosciences and bioproduction businesses expanded their capacity to meet the global vaccine manufacturing requirements of pharma and biotech customers. However, in recent quarters, the demand for COVID-19 testing declined, leading to a low-single-digit drop in diagnostics and healthcare revenues.

Estimate Trend

The Zacks Consensus Estimate for 2024 earnings per share has moved north 0.4% to $21.72 in the past 30 days.

The Zacks Consensus Estimate for the company's 2024 revenues is pegged at $42.87 billion, suggesting a 0.02% rise from the year-ago reported number.

Key Picks

Some better-ranked stocks in the broader medical space are TransMedix Group, Boston Scientific and Intuitive Surgical.

TransMedix Group's earnings are expected to surge 255.8% in 2024. The company's earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 287.5%. Its shares have soared 153.2% compared with the industry's 12.6% growth in the past year.

TMDX sports a Zacks Rank #1 (Strong Buy) at present.

Boston Scientific, carrying a Zacks Rank #2 (Buy) at present, has an estimated earnings growth rate of 17.1% compared with the industry's 15.7%. Shares of the company have rallied 55.7% compared with the industry's 11.4% growth over the past year.

BSX's earnings surpassed estimates in each of the trailing four quarters, the average surprise being 7.2%.

Intuitive Surgical, carrying a Zacks Rank #1 at present, has an estimated long-term earnings growth rate of 17.4% compared with the industry's 13.7%. Shares of the company have soared 68.3% compared with the industry's 12.6% growth over the past year.

ISRG's earnings surpassed estimates in each of the trailing four quarters, the average surprise being 8.97%.

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