Thermo Fisher TMO has been suffering due to a continuous decline in testing sales. Also, competitive headwinds and currency fluctuations continue to dampen top-line growth. The stock carries a Zacks Rank #4 (Sell).

Concerning Factors for TMO

Since the past few quarters, Thermo Fisher has been experiencing a continuous decline in COVID testing-related demand. During the third quarter of 2024, the Life Science Solution business experienced the biggest impact due to the end of COVID-19. Also, diagnostics and healthcare’s reported growth was adversely impacted by the runoff of COVID-19 testing-related revenues. 

International markets contribute a substantial portion of Thermo Fisher’s revenues and the company intends to continue expanding its presence in these regions. International revenues and costs are subject to the risk that fluctuations in exchange rates could adversely impact a company’s reported revenues and profitability when translated into U.S. dollars for financial reporting purposes. As Thermo Fisher’s international sales grow, exposure to fluctuations in currency exchange rates could have a larger effect on its financial results.

The industry-wide trend of difficult macroeconomic conditions in the form of geopolitical pressure leading to disruptions in economic activity, global supply chains and labor markets is creating a challenging business environment for Thermo Fisher. International conflicts, including the Russia-Ukraine war and tension between China and Taiwan, have increased cybersecurity risks on a global basis. Further, volatile financial market dynamics and significant volatility in price and availability of goods and services are putting pressure on the company’s profitability. With sustained macroeconomic pressure, Thermo Fisher may struggle to keep its operating expenses in check.

Thermo Fisher's selling, general and administrative expenses rose 10.2% year over year during the third quarter of 2024.

Thermo Fisher Scientific Inc. Price

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

On account of its diversified portfolio, Thermo Fisher faces different types of competitors, including a broad range of manufacturers and third-party distributors. The competitive landscape is quite tough with changing technology and customer demands that require continuing research and development.

Factors to Drive TMO's Shares

Within the pharma and biotech end market, of late, Thermo Fisher’s biosciences and bioproduction businesses have significantly expanded their capacity to meet the global vaccine manufacturing requirements. In terms of the latest update, despite the runoff of vaccines and therapy revenues, within this end market, the research and safety market channels, as well as the clinical research business, are contributing to the growth. Within “academic and government” end markets, the company delivered strong growth in its electron microscopy business and research and safety market channel. Also, in “industrial and applied” end markets, the company grew low-single-digits during the reported quarter, driven by strong growth in its electron microscopy business.

A few of TMO’s recent strategic acquisitions that are likely to drive future growth include the $ 3.1 billion acquisition of Olink Holdings. The acquisition, which closed in the third quarter, is strategically enhancing Thermo Fisher’s capabilities in the high-growth proteomics market with the addition of highly differentiated solutions. Through acquisition, the company expects to deliver $125 million in adjusted operating income synergies in year five, driven by revenue synergies and cost efficiencies.

Thermo Fisher is consistently making efforts to expand its bioproduction purification resin capacity, which is used in the mRNA manufacturing process. The company’s manufacturing sites in China and Singapore support the enhancement of capacity for single-use technology. These new sites are intended to meet both the local and global demand from biopharma customers. Meanwhile, in South Korea, the company continues to enhance regional capabilities with customer-focused innovation centers for the semiconductor industry and biopharma customers.

In the past year, shares of TMO have gained 2.1%, underperforming the industry’s 5.4% growth. With the company’s consistent focus on expanding in the promising bioproduction space, benefiting from strategic acquisitions and performing favorably in the end market, we expect the stock to gain momentum in the coming days.

Key Picks

Some better-ranked stocks in the broader medical space are Abbott ABT, Haemonetics HAE and Phibro Animal Health PAHC, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Abbott shares have dipped 0.7% in the past year. Estimates for the company’s 2024 earnings per share have remained constant at $4.67 in the past 30 days. ABT’s earnings beat estimates in three of the trailing four quarters and matched the same in one, the average surprise being 1.64%. In the last reported quarter, it posted an earnings surprise of 0.83%.

Estimates for Haemonetics’ fiscal 2025 earnings per share have remained constant at $4.59 in the past 30 days. Shares of the company have dropped 4.4% in the past year against the industry’s growth of 7.8%. HAE’s earnings surpassed estimates in three of the trailing four quarters and missed in one, the average surprise being 2.82%. In the last reported quarter, it delivered an earnings surprise of 2.75%.

Estimates for Phibro Animal Health’s fiscal 2025 earnings per share have increased 1.9% to $1.62 in the past 30 days. Shares of the company have surged 77.6% in the past year compared with the industry’s 7.8% rise. PAHC’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 25.47%. In the last reported quarter, it delivered an earnings surprise of 52.17%.

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