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Why Is Thermo Fisher (TMO) Up 3.3% Since Last Earnings Report?

A month has gone by since the last earnings report for Thermo Fisher Scientific (TMO). Shares have added about 3.3% 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 its most recent earnings report in order to get a better handle on the important drivers.

Thermo Fisher Q4 Earnings Top Estimates, Gross Margin Down

Thermo Fisher’s fourth-quarter 2023 adjusted earnings per share of $5.67 topped the Zacks Consensus Estimate by 0.5%. The figure also rose 5% year over year.

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

GAAP earnings per share was $4.20, up 4.6% on a year-over-year basis.

For the full year, adjusted earnings were $21.55 per share, down 7.3% from the year-ago period’s levels. However, the figure beat the Zacks Consensus Estimate by 0.1%.

Revenues in Detail

Revenues in the quarter totaled $10.89 billion, down 4.9% year over year. The top line surpassed the Zacks Consensus Estimate by 1.4%.

Total revenues for 2023 were $42.86 billion, up 4.6% from the year-ago period’s levels. The figure beat the Zacks Consensus Estimate by 0.4%.

Segment Details

Organic revenues in the reported quarter were 7% lower, while Core organic revenues declined 4%.

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 (22.7% of total revenues) declined 18.9% year over year to $2.47 billion, while Analytical Instruments Segment sales (18.7%) increased 5.2% to $2.04 billion.

Revenues in the Laboratory Products and Biopharma Services segment (52.5%) fell 7.5% to $5.72 billion. The Specialty Diagnostics segment (10.2%) registered a 0.3% year-over-year decline in revenues to $1.10 billion.

Margin Analysis

The gross margin of 41.3% in the fourth quarter contracted 5 basis points (bps) year over year.

In the quarter, selling, general and administrative expenses fell 8.9% to $1.67 billion. Research and development expenses declined 16.4% to $327 million.

The adjusted operating margin in the quarter came in at 22.9%, reflecting an improvement of 103 bps.

Financial Position

The company ended 2023 with cash and cash equivalents of $8.08 billion compared with $8.52 billion at the end of 2022.

Cumulative net cash from operating activities was $8.41 billion compared with $9.15 billion a year ago.

Thermo Fisher has a consistent dividend-paying history, with the five-year annualized dividend growth being 15.89%.

During the quarter, Thermo Fisher returned $3.5 billion of capital to shareholders through stock buybacks and dividends.

Guidance

Thermo Fisher provided 2024 guidance.

The company expects 2024 revenues to be in the range of $42.1-$43.3 billion. The Zacks Consensus Estimate for the same is pegged at $42.71 billion.

The adjusted EPS is projected in the band of $20.95 -$22.00. The Zacks Consensus Estimate for the metric is pegged at $21.77 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -5.75% due to these changes.

VGM Scores

Currently, Thermo Fisher has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. 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 0.5% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.

Intuitive Surgical, Inc. reported revenues of $1.93 billion in the last reported quarter, representing a year-over-year change of +16.5%. EPS of $1.60 for the same period compares with $1.23 a year ago.

Intuitive Surgical, Inc. is expected to post earnings of $1.39 per share for the current quarter, representing a year-over-year change of +13%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Intuitive Surgical, Inc. Also, the stock has a VGM Score of D.

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