How Long Can Thermo Fisher’s Earnings Keep Growing?



Thermo Fisher’s historical and consensus

In fiscal 4Q15, Thermo Fisher Scientific (TMO) witnessed EPS (earnings per share) of $2.12, representing ~42% growth on a YoY (year over year) basis, whereas for fiscal 2015, the company’s EPS growth came to about 35.2%. Its earnings were impacted by strong growth in end markets, except for in industrial markets, where earnings remained flat, and in synergies from its Life Technologies acquisition. It expects strong segmental growth, however—especially in Laboratory Products and Services.

Wall Street analysts estimate adjusted EPS of ~$1.74 in fiscal 1Q16 for Thermo Fisher, which would mean a YoY rise of 68.9%. Moreover, the acquisition of Affymetrix, which is expected to close in the first quarter of 2016, is expected to be EPS accretive.

Notably, Thermo Fisher has reported positive earnings for the past several quarters, beating market consensus consistently on adjusted EPS.

How Long Can Thermo Fisher's Earnings Keep Growing?

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Earnings guidance

Thermo Fisher Scientific (TMO) is one of the biggest medical device companies in the United States. According to the company’s earnings guidance, its EPS is expected to be between $7.8 and $7.96 in 2016, which is expected to factor in the negative impact of currency headwinds, amounting to ~$0.19.

Although this guidance is lower than the previously announced guidance for 2016 (due to the additional impact of currency headwinds), these figures don’t take into consideration the benefits accruing from the Affymetrix acquisition, which is expected to be closed by the end of 1Q16, as well as any additional capital deployment initiatives in 2016 and other strategic initiatives.

Additionally, industrial market pressures are expected to have a negative impact on the company’s performance going forward.

Competitor performances

In 4Q15, Thermo Fisher’s competitors Becton Dickinson (BDX), Abbott Laboratories (ABT), and Stryker (SYK) also came in ahead of market expectations, reporting EPS of 1.96, 0.62, and 1.56, respectively, in the quarter ending December 31, 2016. Thermo Fisher makes up 0.4% of the portfolio holdings in the iShares S&P 500 Growth ETF (IVW).

Now let’s look at the company’s Life Technologies acquisition.


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