Thermo Fisher Rides on End Market Growth, Test Revenues
Recently, we issued an updated research report on Thermo Fisher Scientific, Inc. TMO. The company is rapidly boosting its inorganic growth profile. The most recent takeover was that of Brammer Bio. Its strong focus on the emerging markets is also encouraging. The stock has a Zacks Rank #2 (Buy).
Thermo Fisher has outperformed its industry in the past six months. The stock has surged 48.2% compared with the industry’s 31% rise.
The company delivered an outstanding second-quarter performance, leveraging on its capacity to extend support amid the pandemic. In the quarter, it generated $1.3 billion of COVID-19 related revenues. We are encouraged about the exceptionally strong year-over-year revenue growth at Life Sciences Solutions segment. Also Laboratory Products and Services segment as well as the Specialty Diagnostics segment recorded solid growth.
In terms of end markets, pharma and biotech registered growth on robust performance in bioproduction and pharma services businesses. In diagnostics and healthcare. despite significant headwinds due to a decrease in doctor visits and related testing, the company experienced exceptionally high demand for COVID-19 testing and was able to deliver growth of more than 70% in the second quarter.
In a remarkable breakthrough, in March, Thermo Fisher successfully attained EUA from the FDA for its diagnostic test to be used by the CLIA high-complexity laboratories in the United States. The same month, the company received the CE mark in the European Union as well.
Thermo Fisher Scientific Inc. Price
Thermo Fisher Scientific Inc. price | Thermo Fisher Scientific Inc. Quote
In May, the company received an expanded EUA for its multiplex real-time PCR test intended for the qualitative detection of nucleic acid from SARS CoV 2. It also progressed with highly specialized viral transport media (VTM) for sample collection. At the end of the second quarter, the company noted that its PCR-based workflow was in use in 50 countries. The company ended the quarter with enough capacity to produce more than 10 million tests per week.
Apart from PCR tests, the company is currently working on serological test that can tell if a patient has ever been exposed to the virus. It is also developing a respiratory panel to help doctors determine whether a person has COVID-19 or a different respiratory disease.
Further, in terms of the development of therapeutics and vaccines, Thermo Fisher is partnering with a number of Pharma and biotech customers who are working on pandemic related projects. Its pharma services network is working to produce existing drugs that are showing some effectiveness in treating COVID-19. At present, the company is working on more than 200 COVID-related projects globally.
On the flip side, Thermo Fisher noted that, in the second quarter, the COVID-19 headwinds were significant, which impacted each of its end markets to varying degrees. Overall, the company saw significantly reduced customer activity due to work disruptions.
Particularly, industrial and applied end market registered a decline of just over 10%, while academic and government reported a decline of approximately 20%. Customers in these two end markets were significantly affected by business disruptions due to the pandemic. Even diagnostics and healthcare saw significant headwinds due to a decrease in doctor visits and related testing.
Other Key Picks
Some other top-ranked stocks from the broader medical space are QIAGEN N.V. QGEN, Surmodics, Inc. SRDX and Globus Medical, Inc. GMED.
QIAGEN’s long-term earnings growth rate is estimated at 22.3%. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Surmodics’ long-term expected earnings growth rate is pegged at 10%. It currently carries a Zacks Rank #2 (Buy).
Globus Medical’s long-term earnings growth rate is estimated at 13%. The company presently carries a Zacks Rank #2.
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