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Rise in COVID Tests to Boost Thermo Fisher (TMO) Q4 Earnings

·5-min read

Thermo Fisher Scientific Inc. TMO is slated to release fourth-quarter and full-year 2021 results on Feb 2, before market open.

In the last reported quarter, Thermo Fisher’s earnings of $5.76 per share exceeded the Zacks Consensus Estimate by 23.3%. Its earnings surpassed estimates in each of the trailing four quarters, the average surprise being 9.02%.

Let's discuss the factors that are likely to get reflected in the upcoming results.

Factors at Play

Through the second half of 2021, Thermo Fisher’s Analytical Instruments segment registered a strong rebound despite the negative impact of COVID-19 in the form of muted demand on global economic slowdown. In the third quarter, the segment reported an 11% increase banking on strong growth in the electron microscopy and chromatography and mass spectrometry businesses. We expect this segment to have registered strong growth once again in the fourth quarter based on favorable industry trend and recent strategic collaborations like with Newomics and Cellenion.

Further, the end markets for chemical analysis have been gradually returning to growth. In materials and structural analysis, Thermo Fisher launched the Thermo Scientific Spectra Ultra, a new-generation scanning transmission electron microscope for material science applications. Given the fact that customer demand is high, we expect the businesses to have performed sequentially better in Q4.

Thermo Fisher Scientific Inc. Price and EPS Surprise

Thermo Fisher Scientific Inc. Price and EPS Surprise
Thermo Fisher Scientific Inc. Price and EPS Surprise

Thermo Fisher Scientific Inc. price-eps-surprise | Thermo Fisher Scientific Inc. Quote

Within the Life-Science Solutions segment, most of the company’s COVID-19 response revenues are likely to have been recognized. With the emergence of the Omicron variant through the fourth-quarter months globally, this segment is likely to have also registered strong top-line contributions from growing demand for COVID-19 testing. In the company’s October projection, it had raised its 2021 COVID-19 response revenue guidance from $6.7 billion to $7.7 billion. This increased part of the guidance is expected to have been heavily weighted toward Q4 COVID-19 testing sales.

Further, vaccine and therapy production supplies (recognized in the BioProduction and Biosciences businesses) are likely to have contributed strongly to the company’s growth in Q4. The company is expected to have registered robust growth in genetic sciences, biosciences and bioproduction businesses on the ramp-up of economic activity globally and the company’s pandemic response. The new capacity expansions like a new DNA manufacturing facility in Carlsbad, California, along with strategic partnerships with AstraZeneca and product launches like Gibco Human Plasma-like Medium (HPLM) are expected to have contributed to the Q4 top line positively. The acquisition of cell sorting technology assets from Propel Labs too is likely to have added to the top line in the yet-to-be-reported quarter.

The Specialty Diagnostics segment (Clinical Diagnostics business from the molecular controls that go into testing kits) is expected to have registered positive contributions in the form of continued growth in the immunodiagnostics and transplant diagnostics businesses. Looking at the consistently growing resurgence of the virus-led healthcare needs, the Microbiology, Healthcare Market Channel and Clinical Diagnostics businesses are expected to have witnessed strong growth in Q4. More specifically, the company’simmunodiagnostics, clinical diagnostics, and transplant diagnostics businesses along with growing COVID-19 testing revenues are expected to have contributed strongly.

Within the Laboratory Products and Services segment, the company is expected to have gained from strong productivity and volume leverage within the pharma services business and the research and safety market channel. Also, the PPE business in the research and safety market channel as well as plastics used in testing workflows and cold storage equipment manufactured by the lab products business are expected to have generated strong sales growth in the fourth quarter.

In September, the company’s co-investment with the U.S. government — a $192.5 million contract in coordination with the U.S. Department of Health and Human Services (HHS) to ensure domestic supply of critically needed laboratory pipette tips.This is expected to have had a positive impact on the Q4 top line. However, the December-completed $17.4 billion PPD acquisition is unlikely to contribute significantly to the quarter’s revenues.

Q4 Estimates

The Zacks Consensus Estimate for total revenues of $9.03 billion for the fourth quarter suggests a 14.4% decline from the prior-year quarter’s reported figure. The consensus mark for earnings of $5.22 per share indicates a 26.3% plunge from the year-ago quarter’s reported figure.

What Our Quantitative Model Predicts

Per our proven model, stocks with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) have a good chance of beating estimates. This is exactly the case as you can see:

Earnings ESP: Thermo Fisher has an Earnings ESP of +12.77%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #3.

Other Stocks Worth a Look

Here are three other medical stocks with the right mix of elements to surpass expectations this earnings season.

AMN Healthcare Services, Inc. AMN has an Earnings ESP of +10.29% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

AMN Healthcare’s long-term earnings growth rate is estimated at 16.2%. AMN’s earnings yield of 5.5% compares favorably with the industry’s 0.8%.

Henry Schein, Inc. HSIC has an Earnings ESP of +2.62% and a Zacks Rank of 2.

Henry Schein’s long-term earnings growth rate is estimated at 11.8%. HSIC’s earnings yield of 5.9% compares favorably with the industry’s 4.1%.

Laboratory Corporation of America Holdings LH has an Earnings ESP of +9.58% and a Zacks Rank of 1.

Laboratory Corporation’s long-term earnings growth rate is estimated at 10.6%. LH’s earnings yield of 9.4% compares favorably with the industry’s 3.4%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Laboratory Corporation of America Holdings (LH) : Free Stock Analysis Report

Thermo Fisher Scientific Inc. (TMO) : Free Stock Analysis Report

Henry Schein, Inc. (HSIC) : Free Stock Analysis Report

AMN Healthcare Services Inc (AMN) : Free Stock Analysis Report

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