Thermo Fisher Scientific (TMO) provides life sciences solutions, analytical instruments, specialty diagnostics, laboratory products, and services across the globe. Recently, the company delivered better-than-expected Q2 performance and raised its outlook for Fiscal Year 2021.
Let’s take a look at the financial performance of the company and what has changed in its key risk factors that investors should know.
On the back of robust double-digit growth across all of its verticals, Thermo Fisher’s Q2 revenue surged 34% year-over-year to $9.27 billion, beating analysts’ estimates by $546.4 million. Of this increase, 28% growth was organic, and 2% came from acquisitions.
The Chairman, President, and CEO of Thermo Fisher, Marc N. Casper, said, “The strength of our base business reflects our proven growth strategy, and we continue to enable the societal response to the pandemic, which allowed us to deliver exceptional performance in revenue, earnings, and free cash flow…We are in a great position at the halfway point of the year and on track to deliver an outstanding 2021.”
Earnings per share increased 44% year-over-year to $5.60, beating consensus by $0.13. (See Thermo Fisher stock chart on TipRanks)
Meanwhile, Thermo Fisher has raised its 2021 revenue and earnings guidance. The company has raised its revenue guidance by $300 million to $35.90 billion. It has increased its adjusted EPS guidance by $0.10 to $22.07, representing 13% year-over-year growth.
On August 4, in response to the earnings beat and upped guidance, Argus Research analyst David Toung reiterated a Buy rating on the stock and increased the price target to $600 from $530.
Toung noted that Thermo Fisher was using its strong operating cash flow to bring new products to market, expand capacity and add growth assets.
Based on 12 unanimous Buys, consensus on the Street is a Strong Buy. The average Thermo Fisher price target of $588.42 implies 9.3% upside potential. Shares have gained 31.2% over the past year.
Now, let’s look at what’s changed in the company’s key risk factors profile.
According to the new Tipranks’ Risk Factors tool, Thermo Fisher’s main risk category is Legal & Regulatory, which accounts for 21% of the total 24 risks identified. Since July, the company has added one key risk factor under the Finance & Corporate category.
The company highlights that its indebtedness could have an adverse impact and make it more vulnerable to adverse economic and industry conditions. The company added that the same could also limit its ability to obtain additional funds and acquire new products and technologies through strategic acquisitions.
The agreements governing Thermo Fisher’s debt require it to maintain certain financial ratios and contain affirmative and negative covenants that limit the company’s ability to incur additional debt, merge or consolidate with other entities, make investments, create lien, sell assets and enter into transactions with affiliates.
Thermo Fisher’s ability to comply with these restrictions and covenants depends on its future performance and factors beyond its control like the COVID-19 pandemic, foreign exchange, and interest rates. Any failure to comply with these agreements may result in an event of default under applicable debt instruments, which could require Thermo Fisher to repay the debt before its scheduled due date.
The Macro & Political risk factor’s sector average is at 6%, compared to Thermo Fisher’s 17%.
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