Thermo Fisher (TMO) Strategic Buyouts Help Face Macroeconomic Headwinds

Thermo Fisher TMO benefits from strong performance in end markets. International headwinds continue to hinder overall growth. The stock currently has a Zacks Rank #3 (Hold).

Thermo Fisher’s business strategy is primarily to expand through strategic acquisitions of technologies and businesses that enhance the company’s existing products and services. As a result of these acquisitions, Thermo Fisher recorded significant goodwill and indefinite-lived intangible assets (primarily trade names) on its balance sheet, which amounted to nearly $44.02 billion and $1.24 billion, respectively, as of December 31, 2023.

Several of its recent strategic acquisitions that are expected to drive future growth include the plan to acquire Olink Holdings for $26.00 per common share in cash, announced in October. The acquisition is expected to expand Thermo Fisher’s capabilities in the high-growth proteomics market by adding highly differentiated solutions. The acquisition is expected to deliver $125 million in adjusted operating income synergies in year five, driven by revenue synergies and cost efficiencies.

In August 2023, Thermo Fisher acquired CorEvitas. The acquisition expanded Thermo Fisher’s clinical research capabilities with a leading, regulatory-grade registry platform.

In June 2023, Thermo Fisher acquired MarqMetrix. The acquisition of MarqMetrix is an excellent strategic fit for Thermo Fisher as it adds a highly complementary Raman-based inline PAT system to the Thermo Fisher portfolio.

Thermo Fisher Scientific Inc. Price

Thermo Fisher Scientific Inc. Price | Thermo Fisher Scientific Inc. Offer

In recent years in the pharmaceutical and biotechnology markets, Thermo Fisher’s life science and biomanufacturing businesses have significantly expanded their capabilities to meet the global demands for vaccine production. Additionally, the pharmaceutical services business provides pharmaceutical and biotechnology customers with the services they need to develop and manufacture vaccines and therapeutics worldwide.

In the pharmaceutical and biotechnology markets, the company saw strong growth in its electron microscopy business, as well as in the research and security market channel. The company continues to see an improvement in the biotechnology funding environment and the stimulus program announced by China.

On the other hand, the difficult macroeconomic situation and slower economic recovery in China continue to hurt Thermo Fisher’s growth. The company is experiencing headwinds in government and academic markets. In addition, many countries in Europe are also going through difficult times that could impact their academic budgets. Thermo Fisher remains cautious as growth could slow further if the economic situation worsens.

In Q1 2024, North America saw a mid-single-digit decline, while Europe, Asia-Pacific, and China all saw declines in the low-single-digit range. Our estimates suggest Asia-Pacific will decline by 0.9%, while North America is expected to decline by 0.5% in 2024.

Thermo Fisher’s selling, general and administrative expenses increased 5.2% in the first quarter of 2024.

In addition, as Thermo Fisher’s international sales grow, currency risk will have an increasing impact on its financial results.

In 2023, currency translation had an unfavorable impact on revenue of USD 0.02 billion due to the strengthening of the U.S. dollar against other currencies in which the company sells products and services.

Key Choices

Some of the higher profile stocks in the broader healthcare sector include: Health Hims & Hers HE, Medpace MEDP and DexCom DXCM. While Hims & Hers Health and Medpace have a Zacks Rank #1 (Strong Buy) each, Dexcom currently has a Zacks Rank #2 (Buy). You can see complete list of today’s Zacks Rank #1 stocks here.

Hims & Hers Heath shares are up 138.2% over the past year. The company’s earnings estimates have risen from 18 cents to 20 cents for 2024 and from 33 cents to 38 cents for 2025 over the past 30 days.

HIMS revenue has topped estimates in three of the last four quarters and missed expectations in one, delivering an average surprise of 79.2%. In the last reported quarter, the company posted a stunning earnings surprise of 150%.

Medpace’s 2024 earnings per share estimates have remained unchanged at $11.29 over the past 30 days. The company’s shares are up 67.7% over the past year compared to the industry’s growth of 4.4%.

MEDP’s revenue has topped estimates in each of the last four quarters, with an average surprise of 12.8%. In the last reported quarter, the company’s earnings surprised by 30.6%.

DexCom’s 2024 earnings per share estimates have remained unchanged at $1.78 over the past 30 days. The company’s shares have fallen 15% over the past year compared to the industry’s 0.6% growth.

DXCM revenue has topped estimates in each of the last four quarters, with an average surprise of 34.1%. In the last reported quarter, the company recorded an earnings surprise of 18.5%.

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