Thermo Fisher Scientific Inc. (TMO) is a leading company in the medical instrument and diagnostic equipment industry, with a market capitalization of $184.71 billion. Shares of TMO have gained 46.1% over the past year, and 5.6% over the past month.
The company’s financials have improved significantly in the last quarter. Its revenues have increased 59% year-over-year to $9.91 billion in the first quarter, ended March 31, and its EPS has risen 198% from the same period last year to $5.88.
We think TMO’s COVID-19 testing combo kit and multiple acquisitions should keep investors interested in the stock. Here’s what could drive the company’s growth in the coming months:
High Expected Demand
TMO manufactures medical instruments, specialty diagnostics and analytics software and solutions globally. Because the majority of developed countries are executing mass COVID-19 vaccination drives that are now showing signs of success in beating back the virus, the healthcare industry in the West is likely to soon shift its focus to delivering solutions in other healthcare areas. With people now beginning to reschedule delayed, non-emergency doctor visits post pandemic, the demand for state-of-the-art medical instruments and diagnostic equipment is expected to increase.
TMO has taken several steps to strengthen its position in the medical diagnostics industry in anticipation of the projected boom. On April 15, the company acquired PDD, Inc., which provides clinical research services to the pharma and biotech industry. The acquisition expands TMO’s customer base to the commercial biotech and pharma industry, thereby increasing its market share. And in February, TMO acquired molecular diagnostic company Mesa Biotech, Inc. The acquisition is expected to increase TMO’s revenues by approximately $200 million in 2021.
Robust Growth Prospects
A $6.65 consensus EPS estimate for the most recent quarter, ended March 2021, indicates a 126.2% improvement year-over-year. Moreover, TMO’s EPS is expected to rise 39.3% in the current quarter (ending June 2021), and 12.5% in the current year. The company has an impressive earnings surprise history also; it beat Street’s EPS estimates in each of the trailing four quarters.
Analysts expect TMO’s revenues to rise 12.6% from the same period last year to $9.72 billion in the about-to-be-reported quarter, and 26.5% year-over-year to $88.75 billion in the current quarter. The Street expects its revenues to come in at $35.50 billion in 2021, up 10.2% from the year-ago value.
Consensus Rating and Price Target Indicate Potential Upside
Of 13 Wall Street analysts that have rated TMO, 12 rated it Buy, while one rated it Hold. TMO’s $559.23 12-month median price target indicates an 18.1% potential upside. The price target ranges from a low of $520 to a high of $600.
Favorable POWR Ratings
TMO has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
TMO has an A grade for Growth, and B for Sentiment. The company’s growth financials in the last reported quarter and favorable analyst sentiment justify these grades. Among 57 stocks in the Medical – Diagnostics/ Research industry, TMO is ranked #9.
Beyond what we’ve stated above, one can check out additional TMO Ratings for Value, Momentum, Stability and Quality here.
Click here to view the top-rated stocks in the Medical – Diagnostics/ Research industry.
TMO’s exemplary performance over the past year demonstrates the company’s operational resiliency in tandem with recent industry tailwinds. Besides acquisitions, TMO launched several products in 2021, such as spectrometers and pathogen surveillance samplers, which have been positively received . These products are expected to drive TMO’s financials in the coming quarters.
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TMO shares were unchanged in after-hours trading Thursday. Year-to-date, TMO has declined -0.24%, versus a 12.72% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...
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