Thermo Fisher Scientific (TMO) is a world leader in serving science. The company strives to empower its customers to make the world healthier, cleaner, and safer.
By serving more than 400,000 customers in pharmaceutical and biotech companies, hospitals and clinical diagnostic labs, universities, research institutions, and government agencies, amongst other areas, no other company matches Thermo Fisher in its field.
Thermo Fisher’s resilience has been demonstrated repeatedly over the years, while the pandemic boosted its revenues, allowing the company to execute on its R&D and M&A moves at an elevated pace.
With Thermo Fisher’s resulting coming in quite strong once again, I remain bullish on this blue-chip stock.
Latest Results
Thermo Fisher’s Q4-2021 results came in quite strong, despite revenues growing by “just” 1% to $10.7 billion. The company’s results last year were quite inflated due to additional COVID-19-related spending. Hence, seeing results growing on top of inflated earnings is quite impressive.
Specifically, organic revenues decreased 4%, acquisitions increased revenue by 6%, while FX affected revenues negatively by around 1%. Organic growth from the base business came in at 8%.
As far as profitability goes, Thermo Fisher’s net income margin was 15.5%, suggesting a decline from last year’s 23.7%, driven by increased operating expenses. Consequently, diluted EPS came in at $4.17 versus $6.24 in Q4 2020 – a very profitable quarter nonetheless.
Management persisted with investing towards expanding its industry-leading scale in high-growth and emerging markets. Particularly, 2021 was a very busy year in terms of capital deployment, with the company investing $24 billion in strategic acquisitions.
This amount includes the addition of PPD, Inc., a leading provider of clinical research services for the biopharma industry, as well as the acquisition of PeproTech, a leading provider of recombinant proteins.
Amid a better-than-expected Fiscal 2021, management announced in the earnings call a raised Fiscal 2022 revenue guidance, expecting sales of $42 billion and an adjusted EPS of $22.43. This implies an EPS growth of around 14.3% compared to 2021, which again reflects the excellent strength of the business to grow on top of quite elevated numbers already.
It’s also worth noting that Thermo Fisher’s management has historically been conservative with its outlook early on in the year. Hence, I would not be surprised if management hiked its estimates as we advanced through 2022.
The Valuation
Based on management’s outlook, Thermo Fisher is currently trading at a forward P/E of around 26.4. While this is not the cheapest multiple in the industry, I believe it is well-justified considering its consistent growth, moat, and overall qualities.
Wall Street’s Take
Turning to Wall Street, Thermo Fisher Scientific has a Strong Buy consensus rating, based on six Buys and one Hold assigned in the past three months. At $690.43, the average Thermo Fisher Scientific price target implies 16.8% upside potential.
Conclusion
Thermo Fisher Scientific’s moat and expertise in the industry are quite unparalleled. Revenues and net income continue expanding despite the elevated results from last year’s pandemic-driven boost, which is rather remarkable.
Further, the company has retained a healthy balance sheet, featuring a $4.5 billion cash position despite its aggressive M&A. Following last year’s results and management’s guidance which indicates Thermo Fisher still enjoys strong momentum, I remain bullish on the stock.
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