On Dec 22, 2015, we issued an updated research report on Thermo Fisher Scientific Inc. TMO – Massachusetts-based scientific instrument maker and a world leader in serving science.
Thermo Fisher has carried out multiple acquisitions 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.
Thermo Fisher currently is on track to deliver revenue and cost synergy targets related to the Life Technologies acquisition. In the third quarter of 2015, the company realized $32 million of incremental cost synergies, in line with its full-year target of $130 million. Revenue synergies during the third quarter were $25 million which puts Thermo Fisher in a comfortable position to slightly exceed its full-year targeted synergy of $60 million. Accordingly, the company is also on track to deliver $150 million in revenue synergies in 2016.
We are also encouraged to note that, despite a muted government funding environment in China, the company managed to deliver double-digit growth therein in the third quarter, which contributed to healthy growth in overall APAC. The strength came on solid demand for laboratory equipment, consumables and bioscience reagents.
Notably, Thermo Fisher reported a better-than-expected third-quarter 2015 with adjusted EPS and revenues exceeding the respective Zacks Consensus Estimate. However, the top line suffered on a year-over-year basis hurt by an unfavorable foreign exchange rate. Nevertheless, Thermo Fisher increased its 2015 revenue and earnings guidance reflecting confidence in its operational performance as well as a robust scope for improvement despite the current challenging scenario.
However, economic uncertainties and currency headwinds continue to act as major dampeners. The stock currently has a Zacks Rank #3 (Hold).
Key Picks in the Sector
Some medical instrument stocks that warrant a look include Masimo Corporation MASI, Steris Plc STE and ABIOMED, Inc. ABMD. While MASI and STE sport a Zacks Rank #1 (Strong Buy), ABMD carries a Zacks Rank #2 (Buy).
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