Thermo Fisher Retains Balanced View - Analyst Blog

On May 13, 2014, we issued an updated research report on Thermo Fisher Scientific Inc. TMO – scientific instrument maker and a world leader in serving science. Despite challenging economic conditions, a competitive environment and pressure on core segments, Thermo Fisher managed to post healthy first-quarter 2014 results handily beating both the revenue and earnings estimates. 

The company posted a better-than-expected first quarter with adjusted earnings per share of $1.53 and revenues of $3.90 billion, both ahead of the respective Zacks Consensus Estimate of $1.40 and $3.72 billion. The results also sailed past the year-ago numbers.

We are also optimistic about the company's recently completed mega $13.6 billion takeover of Life Technologies Corporation. Given Life Technologies' expansive line of consumables for genomic, and molecular and cell biology, the buyout will complement Thermo Fisher's market-leading portfolio of analytical technologies and specialty diagnostics.

Thermo Fisher projected that the Life Technologies buyout should be immediately accretive to its adjusted earnings by 90 cents to $1.00 per share within the first full year of the takeover. Further, the acquisition should create significant cost and revenue synergies for the company, with expected adjusted operating income synergies of $85 million in the first year.

Additionally, substantial expansion in the Asia-Pacific market, mainly China, is on the cards for the company. Given the huge potential in the region and high growth rate in China, Thermo Fisher is likely to exceed its goal of garnering 25% of revenues from the high-growth Asia-Pacific region and emerging markets by 2016.

However, in a challenging market environment, mere 2% organic growth remains a matter of concern. Moreover, economic uncertainties and currency headwinds continue to act as major dampeners.

Other Stocks to Consider

Some better-ranked medical instruments stocks that are worth a look include Masimo Corporation MASI, Natus Medical Inc. BABY and Accuray Incorporated ARAY. All of these three stocks carry a Zacks Rank #2 (Buy).

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