Thermo Fisher Strong on Global Business Amid Forex Woes

On Mar 27, we issued an updated research report on Thermo Fisher Scientific Inc. TMO. The company boasts strong international operations and has witnessed consistent growth in the Asia-Pacific and emerging markets. However, the company’s earnings have been affected by unfavorable foreign exchange over the last few quarters. The stock carries a Zacks Rank #3 (Hold).

This leading scientific instrument maker has been outperforming its industry in the past year. The stock has rallied 34.2% compared with 21.9% gain of the industry.

Meanwhile, Thermo Fisher has been witnessing solid growth globally on strong expansion.  The company plans to continue to strengthen its foothold in emerging markets, such as China and India, and other regions such as South Korea, Russia and Brazil. In the fourth quarter of 2017, the standout contributors were China, India and South Korea.

 

 

China led the way with growth in the high teens. The company opened two customer demo centers in the region, reflecting the company’s leading position in the electron microscopy and precision medicine space. The company has also invested significantly in its digital capabilities. In India, the company is currently working on tapping into growth opportunities in biopharma, healthcare and food safety markets.

As part of its strategy to effectively deploy capital, Thermo Fisher has undertaken several acquisitions in the recent past. Apart from boosting revenues, these deals have driven the operating margin while also resulting in tax synergies. In this regard, Thermo Fisher’s acquisition of FEI Company has started to boost its analytical instruments portfolio.

Also in 2017, the company spent $7.8 billion on acquisitions, adding leading biopharma contract development and manufacturing services through Patheon buyout. Significantly enhancing the company’s value proposition for biopharma customers, Patheon has started to contribute to Thermo Fisher’s laboratory products and services segment.

On the flip side, Thermo Fisher derives a huge portion of its revenues from the international market, which exposes it to fluctuations in foreign currency. In the past several years, the company’s earnings were affected by adverse currency movements to a great extent. These apart, competitive headwinds and rising operating costs pose a threat.

Zacks Rank & Key Picks

Some better-ranked stocks in the broader medical sector are Bio-Rad Laboratories BIO, athenahealth, Inc. ATHN and Edwards Lifesciences Corporation EW.

Bio-Rad Laboratories sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. The company has a long-term expected earnings growth rate of 20%.

athenahealth is a Zacks #1 Ranked player. The company has a long-term expected earnings growth rate of 21.5%.

Edwards Lifesciences has a long-term expected earnings growth rate of 15.1%. The stock has a Zacks Rank of 2 (Buy).

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