Can Thermo Fisher Scientific Continue to Exceed Performance Expectations?



Recent financial performance

Thermo Fisher Scientific (TMO) reported revenues of $4.3 billion in 1Q16, which represents a YoY (year-over-year) increase of ~10%. By comparison, its 4Q15 revenues represented a YoY growth of ~3.6%.

These revenues exceeded the analyst expectations. The company’s 1Q16 EPS (earnings per share) also came in higher than expected at $1.80, which represents a YoY growth of around 10%.

As depicted in the graph above, the company has a strong track record of adjusted EPS growth. It maintained the record and delivered a strong financial performance in 1Q16—despite strong currency headwinds and acquisition costs. The company’s performance was positively impacted by strong end-markets, primarily in the biotech and pharmaceutical markets.

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2Q16 and fiscal 2016 guidance and expectations

For fiscal 2016, Thermo Fisher Scientific expects to report revenue growth of around 5%–6%, and organic growth is estimated to be about 4%. Its adjusted EPS is expected to grow by 9%–11%, and its adjusted operating margin is expected to expand by 50–70 basis points.

Thermo Fisher Scientific expects to generate cash flows of around $2.7 billion in fiscal 2016. According to analyst estimates, Thermo Fisher Scientific is expected to report revenues of around $4.5 billion in 2Q16, with EPS estimates standing at around $2.01.

Peers and major factors

Peers Abbott Laboratories (ABT), Becton Dickinson (BDX), and Baxter (BAX) are expected to report noteworthy EPS next quarter as well. The Vanguard Growth ETF (VUG) holds ~0.64% of its total holdings in Thermo Fisher Scientific.

Thermo Fisher Scientific is positioned for strong growth in 2016 and beyond. Synergies from the Affymetrix acquisition, weaker currency headwinds, strong operational performance, and recent stock buybacks are among the major factors that will likely contribute to the company’s strong financial performance. It bought back $1 billion in shares in 1Q16.

Next, let’s look at the company’s financial model for the next few years.


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