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Thermo Fisher (TMO) Q4 Earnings Beat on Growth in All Segments

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Thermo Fisher Scientific Inc.'s (TMO - Free Report) fourth-quarter 2020 adjusted earnings per share of $7.09 beat the Zacks Consensus Estimate by 3.4%. The figure surged 99.7% year over year. The adjusted number excludes certain non-recurring expenses including asset amortization costs and certain restructuring costs.

On a reported basis, earnings per share were $6.24 compared with $2.49 a year ago.

Significant COVID-19 led business expansion as well as the company’s base business growth contributed to such a stunning bottom-line performance.

For the full year, adjusted earnings were $19.55 per share, reflecting a 58.3% rise from the year-ago period. It also beat the Zacks Consensus Estimate by 1.1%.

Revenues in the quarter under review grossed $10.55 billion, up 54.5% year over year. The top line exceeded the Zacks Consensus Estimate by 2.6%.

In the fourth quarter, the company generated $3.2 billion of COVID-19 response revenues and reported accelerated growth in its base business.

Total revenues for 2020 were $32.2 billion, a 26.3% rise from the year-ago period. This came ahead of the Zacks Consensus Estimate by 4.3%.

Quarter in Detail

Organic revenues in the reported quarter grew 51% year over year. Favorable currency translation increased revenues by 3%.

Thermo Fisher operates under four business segments: Life Sciences Solutions, Analytical Instruments, Specialty Diagnostics, and Laboratory Products and Services.

Revenues at the Life Sciences Solutions segment (41.4% of total revenues) improved 138% year over year to $4.37 billion while Analytical Instruments Segment sales (15.5%) rose 8% to $1.64 billion.

Revenues at the Laboratory Products and Services segment (34.3%) rose 28.8% to $3.62 billion. The Specialty Diagnostics segment (18.6%) recorded 109% year-over-year rise in revenues to $1.97 billion.

Gross margin of 53.9% in the fourth quarter expanded 761 basis points (bps) year over year on 79.9% rise in gross profits. Adjusted operating margin for the quarter came in at 33.3%, reflecting an expansion of 858 bps.

The company exited 2020 with cash and cash equivalents of $10.33 billion compared with $7.54 billion at the end of the third quarter. Full-year net cash provided by operating activities was $8.29 billion compared with $4.97 billion a year ago.

Guidance

The company stated that it will come up with its 2021 financial guidance on its earnings conference call.

Bottom Line

Thermo Fisher ended the fourth quarter as well as full-year 2020 with better-than-expected numbers. The company delivered an outstanding quarterly performance, leveraging on its capacity to extend support amid the pandemic. In the quarter, it generated $3.2 billion of COVID-19 related revenues.

We are encouraged about the exceptionally strong year-over-year revenue growth at Life Sciences Solutions and Specialty Diagnostics segments. Meanwhile, margin expansion in the fourth quarter was encouraging.

Zacks Rank and Key Picks

Thermo Fisher currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader medical space are IDEXX Laboratories, Inc. (IDXX - Free Report) , Align Technology, Inc. (ALGN - Free Report) and Omnicell, Inc. (OMCL - Free Report) .

The Zacks Consensus Estimate for IDEXX’s fourth-quarter 2020 revenues is pegged at $679.3 million, suggesting a year-over-year improvement of 12.2%. The same for EPS stands at $1.43, indicating growth of 37.5% from the year-ago reported figure. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Align Technology’s fourth-quarter 2020 revenues is pegged at $781.9 million, implying 20.3% increase from the year-earlier reported figure. The same for EPS stands at $2.13, indicating growth of 39.2% from the year-ago reported figure. The company currently carries a Zacks Rank #2.

The Zacks Consensus Estimate for Omnicell’s fourth-quarter 2020 EPS is currently pegged at 79 cents, indicating growth of 2.6% from the year-ago reported figure. The company currently sports a Zacks Rank #1.

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