Thermo Fisher's TMO Bioproduction business prospects look promising. Strategic buyouts and partnerships are likely to drive the company’s growth. Yet, macroeconomic issues and currency fluctuations dampen growth. The stock carries a Zacks Rank #3 (Hold).
Factors Driving TMO's Shares
Thermo Fisher’s business strategy primarily includes expansion through strategic acquisition of technologies and businesses that augment the company’s existing products and services. As a result of these acquisitions, Thermo Fisher recorded significant goodwill and indefinite-lived intangible assets (primarily tradenames) on its balance sheet, amounting to nearly $44.02 billion and $1.24 billion, respectively, as of Dec. 31, 2023.
A few of its recent strategic acquisitions that are likely to drive future growth include the $3.1 billion acquisition of Olink Holdings. The acquisition, closed in the third quarter, is strategically enhancing Thermo Fisher’s capabilities in the high-growth proteomics market with the addition of highly differentiated solutions. Through this acquisition, the company expects to deliver $125 million in adjusted operating income synergies in year five, driven by revenue synergies and cost efficiencies.
Within the pharma and biotech end market, of late, Thermo Fisher’s biosciences and bioproduction businesses have significantly expanded its capacity to meet global vaccine manufacturing requirements. In terms of the latest update, despite the runoff of vaccines and therapy revenues, within this end market, the research and safety market channel and the clinical research business are contributing to the growth. Within academic and government end markets, the company delivered strong growth in its electron microscopy business and research and safety market channel. Also, in industrial and applied end markets, the company recorded low single-digit growth during the reported quarter, driven by strong growth in its electron microscopy business.
Thermo Fisher is consistently making efforts to expand its bioproduction purification resin capacity, which is used in the mRNA manufacturing process. The company’s manufacturing sites in China and Singapore support the enhancement of capacity for single-use technology. These new sites are intended to meet both the local and global demand from biopharma customers. Meanwhile, in South Korea, the company continues to enhance regional capabilities with customer-focused innovation centers for the semiconductor industry and biopharma customers.
In the past year, shares of TMO have gained 2.3% compared with the industry’s 7.7% growth. The company continues to benefit from strategic acquisitions and favorable end-market performance. With its consistent focus on expanding the promising bioproduction space, we expect the stock to gain further momentum in the coming days.
Concerning Factors for TMO
The industry-wide trend of difficult macroeconomic conditions in the form of geopolitical pressure leading to disruptions in economic activity, global supply chains and labor markets is creating a challenging business environment for Thermo Fisher. International conflicts, including the Russia-Ukraine war and tension between China and Taiwan, have increased cybersecurity risks on a global basis. Further, volatile financial market dynamics and significant volatility in price and availability of goods and services are putting pressure on the company’s profitability. Given the sustained macroeconomic pressure, Thermo Fisher may struggle to keep its operating expenses in check.
Thermo Fisher's selling, general and administrative expenses also rose 10.2% year over year during the third quarter of 2024.
Thermo Fisher Scientific Inc. Price
Thermo Fisher Scientific Inc. Price
Thermo Fisher Scientific Inc. price | Thermo Fisher Scientific Inc. Quote
Further, international markets contribute a substantial portion of Thermo Fisher’s revenues, and the company intends to expand its presence in these regions. International revenues and costs are subject to the risk that fluctuations in exchange rates could affect a company’s reported revenues and profitability when translated into U.S. dollars for financial reporting purposes. As Thermo Fisher’s international sales grow, exposure to fluctuations in currency exchange rates could have a bigger effect on its financial results.
Key Picks
Some better-ranked stocks in the broader medical space are Penumbra PEN, Haemonetics HAE and Phibro Animal Health PAHC, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Penumbra shares have dropped 0.1% in the past year. Estimates for the company’s 2024 earnings per share have increased 2 cents to $2.81 in the past 30 days. PEN’s earnings beat estimates in three of the trailing four quarters and missed on one occasion, the average surprise being 10.54%. In the last reported quarter, it posted an earnings surprise of 23.19%.
Estimates for Haemonetics’ fiscal 2025 earnings per share have remained constant at $4.59 in the past 30 days. Shares of the company have dropped 7% in the past year against the industry’s growth of 13.9%. HAE’s earnings surpassed estimates in three of the trailing four quarters and missed in one, the average surprise being 2.82%. In the last reported quarter, it delivered an earnings surprise of 2.75%.
Estimates for Phibro Animal Health’s fiscal 2025 earnings per share have increased 1.9% to $1.62 in the past 30 days. Shares of the company have surged 100% in the past year compared with the industry’s 13.9% rise. PAHC’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 25.47%. In the last reported quarter, it delivered an earnings surprise of 52.17%.
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