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Thermo Fisher (TMO) Up 2.3% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Thermo Fisher Scientific (TMO). Shares have added about 2.3% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Thermo Fisher due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Thermo Fisher Q1 Earnings Top Estimates, 2024 View Up

Thermo Fisher Scientific Inc.'s first-quarter 2024 adjusted earnings per share (EPS) of $5.11 topped the Zacks Consensus Estimate by 8.7%. The figure also rose 1.6% year over year.

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The adjusted number excludes certain non-recurring expenses, including asset amortization costs and certain restructuring costs.

GAAP EPS was $3.46, up 4.2% on a year-over-year basis.

Revenues in Detail

Revenues in the quarter totaled $10.35 billion, down 3.4% year over year. The top line surpassed the Zacks Consensus Estimate by 2%.

Segment Details

Organic revenues in the reported quarter were 4% lower, while Core organic revenues declined 3%.

Thermo Fisher operates under four business segments — Life Sciences Solutions, Analytical Instruments, Specialty Diagnostics and Laboratory Products and Biopharma Services.

Revenues in the Life Sciences Solutions segment (22.1% of total revenues) declined 12.5% year over year to $2.29 billion, while Analytical Instruments Segment sales (16.3%) declined 2.1% to $1.69 billion.

Revenues in the Laboratory Products and Biopharma Services segment (55.3%) fell 0.7% to $5.72 billion. The Specialty Diagnostics segment (10.7%) registered a 0.1% year-over-year growth in revenues to $1.11 billion.

Margin Analysis

The gross margin of 41.6% in the first quarter expanded 172 basis points (bps) year over year.

In the quarter, selling, general and administrative expenses rose 5.2% to $1.73 billion. Research and development expenses declined 4.3% to $331 million.

The adjusted operating margin in the quarter came in at 21.7%, reflecting an improvement of 38 bps.

Financial Position

The company ended first-quarter 2024 with cash and cash equivalents of $5.49 billion compared with $8.08 billion at the end of fourth-quarter 2023.

Cumulative net cash from operating activities was $1.25 billion compared with $729 million a year ago.

Thermo Fisher has a consistent dividend-paying history, with the five-year annualized dividend growth being 16.39%.

Guidance

Thermo Fisher raised its 2024 guidance.

The company now expects 2024 revenues to be in the range of $42.3-$43.3 billion (up from previous guided range of $42.1-$43.3 billion). The Zacks Consensus Estimate for the same is pegged at $42.73 billion.

The adjusted EPS is projected in the band of $21.14-$22.02 (the previous guidance was $20.95-$22.00). The Zacks Consensus Estimate for the metric is pegged at $21.51 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Thermo Fisher has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Thermo Fisher has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Thermo Fisher belongs to the Zacks Medical - Instruments industry. Another stock from the same industry, Intuitive Surgical, Inc. (ISRG), has gained 6.8% over the past month. More than a month has passed since the company reported results for the quarter ended March 2024.

Intuitive Surgical reported revenues of $1.89 billion in the last reported quarter, representing a year-over-year change of +11.5%. EPS of $1.50 for the same period compares with $1.23 a year ago.

For the current quarter, Intuitive Surgical is expected to post earnings of $1.53 per share, indicating a change of +7.8% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Intuitive Surgical. Also, the stock has a VGM Score of F.

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