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Thermo Fisher Grows on Coronavirus Diagnostic Tests Amid Crisis

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Zacks Equity Research
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On Jun 19, 2019, we issued an updated research report on Thermo Fisher Scientific, Inc. TMO. The company is rapidly ramping up its inorganic growth profile. The firm’s recent takeover is that of Brammer Bio. Notably, its strong focus on emerging markets is encouraging. The stock currently has a Zacks Rank #3 (Hold).

Thermo Fisher has outperformed its industry in the past six months. The stock has risen 6.6% versus the industry’s 3.6% decline.

In first-quarter 2020, Thermo Fisher registered strong year-over-year revenue growth at Life Sciences Solutions and Laboratory Products and Services segments. The company’s end market underlying growth performance was strong before the outbreak in China. Barring the China business, North America and Europe did well through the quarter and according to Thermo Fisher, the coronavirus-impact in those geographies was not prominent until very late in March.

Thermo Fisher Scientific Inc. Price

Thermo Fisher Scientific Inc. Price
Thermo Fisher Scientific Inc. Price

Thermo Fisher Scientific Inc. price | Thermo Fisher Scientific Inc. Quote

Meanwhile, the company is optimistic about the progress related to its COVID-19 diagnostic test. It has received authorization for emergency use and began to ramp up production to meet growing global demand. In the first quarter already, the company reported rapid uptake of these diagnostic kits. Also, a series of product launches with progress in precision medicine initiatives aided its performance. During the reported quarter, the company launched the Thermo Scientific Vanquish Core HPLC system (within its chromatography and mass spectrometry business) and Thermo Scientific Labtainer Pro BioProcess Container (within bio production business).

We currently look forward to Thermo Fisher’s agreement to acquire QIAGEN N.V. for $11.5 billion (announced in March). It is aimed at expanding the company’s specialty diagnostics portfolio with QIAGEN’s molecular diagnostics capabilities and also enhancing the company’s life sciences offering with QIAGEN’s sample preparation technologies.

On the flip side, Thermo Fisher noted that in the first quarter, the COVID-19 tailwind was around 3% of revenue growth while the headwinds of COVID-19 were around 6%, largely driven by customer shutdowns in China. In fact, Asia Pacific declined in the mid-teens due to a decline of approximately 25% in China. Overall, COVID-19 accounted for about 3% net headwind in the quarter.

In the quarter, the company’s two of the end markets registered significant loss. The industrial and applied end market declined 10% year over year, primarily due to the impact of COVID-19 related shutdowns in China. Academic and government declined in the mid-single digits as academic closed first in China and in other countries later in the quarter.

In terms of second-quarter organic growth projection, the company noted that based on a series of fleeting variables, its ‘current best estimates’ of how these variables will  impact organic growth are somewhere between flat and negative 15%.

Key Picks

Some better-ranked stocks from the broader medical space are Quest Diagnostics Incorporated DGX, Hologic, Inc. HOLX and QIAGEN N.V. QGEN.

Quest Diagnostics’ long-term earnings growth rate is projected at 7.6%. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hologic’s long-term earnings growth rate is estimated at 7%. The company presently has a Zacks Rank #2.

QIAGEN’s long-term earnings growth rate is estimated at 12.2%. It currently sports a Zacks Rank #1.

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Quest Diagnostics Incorporated (DGX) : Free Stock Analysis Report
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QIAGEN N.V. (QGEN) : Free Stock Analysis Report
Thermo Fisher Scientific Inc. (TMO) : Free Stock Analysis Report
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