Morningstar | Thermo Fisher Continues Its Strong Growth Momentum in 3Q
Thermo Fisher Scientific reported strong third-quarter results at 16% revenue growth, or 10% in organic terms. As a result, the firm raised its full-year guidance on the revenue and earnings lines, expecting 15% revenue growth and 16%-17% EPS growth year on year (previous guidance at 13%-14% revenue growth and 15%-16% EPS growth over 2017). We plan to slightly adjust our 2018 numbers to account for the better-than-expected operational environment, but not enough to result in a material change to our fair value estimate of USD 203. Our narrow moat rating is intact, and shares look expensive at current levels.End markets still show favourable conditions across the board. The pharma customer base delivered high-teens growth, with strength in products like chromatography and mass spectrometry equipment. The academic and government grew in the midsingle digits, benefiting from the improved funding in the U.S. The industrial and applied segment delivered high-single-digit growth, led by strong performance across the analytical instruments business. All geographies delivered good growth: Europe and North America grew in the high single digits while Asia-Pacific delivered growth in the low teens, with China leading at more than 20% growth in the quarter. In China, precision medicine and molecular microscopy centres drove demand in the quarter for life-sciences technologies.
By segments, three business segments achieved low-double-digit organic growth--analytical instruments, lab products, and life sciences--while speciality diagnostics delivered 7% organic growth, with good performance in the transplant and clinical diagnostics area. Operating margin expansion was mixed across the segments, with unfavourable business mix and strategic investments more than offsetting volume. As a result, the firm's operating margin was 22.1%, down 80 basis points on the third quarter of last year.
Thermo Fisher Scientific is engaged in serving science. The company's segments include: Life Sciences Solutions, which provides reagents, instruments and consumables used in biological and medical research, discovery and production of new drugs and vaccines as well as diagnosis of disease; Analytical Instruments, which provides instruments, consumables, software and services that are used for a range of applications in the laboratory, on the production line and in the field; and Specialty Diagnostics, which provides diagnostic test kits, reagents, culture media, instruments and associated products for customers in healthcare, clinical, pharmaceutical, industrial, and food safety laboratories.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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