Is TMO a Buy?
Read management/analysts’ comments quarterly earnings
The company dominates the diagnostics and life-sciences market and enjoys a clear advantage over rivals like Agilent Technologies Inc. (NYSE: A), thanks to its impressive market share and growing product portfolio. Though the business experienced a slowdown in the early days of the pandemic, a surge in the demand for COVID diagnostics helped it regain momentum quickly. Last year, the company successfully launched many new products including coronavirus diagnostic kits.
From Thermo Fisher’s Q1 2021 earnings conference call:
“We’ve expanded capacity. We have alleviated supply chain issues across the industry. And we put ourselves in a position to have a bigger business coming out of the pandemic. And then finally, we were a tiny player in specimen collection, and we’ll have a nice business on things like viral transport media, obviously, at a much smaller level than the pandemic. I mean it’s been unprecedented, the demand for viral transport media during the pandemic, but we built low-cost capacity in two countries to be able to serve the world.”
In the Pipeline
Supported by the steady cash flow, the company is well-positioned to take forward its growth initiatives including M&A deals and capacity expansion. Recently, it inked a pact to buy contract research organization PPD for $17.4 billion, a move aimed at better serving customers in the rapidly growing pharma-biotech end-market that accounts for nearly half of annual revenues.
Meanwhile, being a top supplier of diagnostics products across the globe and having tapped into most of the addressable market, Thermo Fisher might need to explore new avenues for expansion. Also, demand will likely moderate post-COVID, which in turn could weigh on the company’s top-line, though the impact would be partly offset by the strength of the core business.
Good Start to FY21
Thermo Fisher’s quarterly earnings have beaten Wall Street’s estimates consistently for more than a decade. In the first three months of fiscal 2021, revenues jumped 59% to about $10 billion and topped expectations even as all the key business divisions grew in double digits. Consequently, adjusted earnings more than doubled to $7.21 per share.
Is Merck stock still a buy after losing the vaccine race?
The stock is currently trading close to the record highs seen in the final weeks of 2020, after making steady gains since early last year. It closed Friday’s regular session lower but stayed above the 52-week average. TMO has grown about 40% in the past twelve months.