On Jul 1, 2015, we issued an updated research report on Thermo Fisher Scientific Inc. TMO – scientific instrument maker and a world leader in serving science.
According to the company, the Life Technologies integration is progressing well and Thermo Fisher is on track to deliver revenue and cost synergy targets from the same. At the end of 2015, the company expects to deliver $125 million of cost synergy benefits, up $10 million from the previous guidance of $115 million, primarily due to accelerating realization of head count and sourcing synergies. The company is also confident of its overall three-year synergy target which has been raised from $300 million to $350 million.
Revenue synergies in the last reported quarter were $5 million with $2 million of adjusted operating income pull-through. Thermo Fisher expects revenue synergies to accelerate through 2015 and hence is confident to achieve the full year guidance of $60 million in revenue synergies and $20 million in adjusted operating income pull-through.
Thermo Fisher has carried out multiple acquisitions in the past that have added complementary technologies, expanded its presence in high-growth markets, and generated cost and revenue synergies thereby creating shareholder value. Apart from boosting revenue accretion, these deals have historically benefited the company’s operating margin while also resulting in tax synergies.
Last week, the company agreed to acquire Heysham, U.K.-based research chemical manufacturer, Alfa Aesar, for $405 million (£256 million) in cash. According to Thermo Fisher, this acquisition will help the company expand its existing portfolio of chemicals, solvents and reagents that support laboratory applications such as research, drug discovery and development, and production. We believe the acquisition of Alfa Aesar will benefit the company on similar lines, going ahead.
However, economic uncertainties and currency headwinds continue to act as major dampeners. The stock currently holds a Zacks Rank #2 (Buy).
Key Picks in the Sector
Some other medical instrument stocks worth a look are Globus Medical, Inc. GMED, Hologic Inc. HOLX and Accuray Incorporated ARAY. All the three stocks carry the same Zacks Rank as Thermo Fisher.
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