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Thermo Fisher (TMO) Q1 Earnings Beat Estimates, Margins Down

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Thermo Fisher Scientific Inc.'s (TMO - Free Report) first-quarter 2022 adjusted earnings per share (EPS) of $7.25 beat the Zacks Consensus Estimate by 17.5%. The figure edged up 0.6% year over year.

The adjusted number excludes certain non-recurring expenses, including asset amortization costs and certain restructuring costs.

GAAP EPS was $5.61, reflecting a 4.6% rise on a year-over-year basis.

Revenues in Detail

Revenues in the quarter under review grossed $11.82 billion, up 19% year over year. The top line exceeded the Zacks Consensus Estimate by 11.2%.

Segment Details

Organic revenues in the reported quarter rose 3% year over year, while currency translation lowered revenues by 2%. Acquisitions contributed 18% to the top line and core organic revenue growth (considering the impact of PPD revenue, excluding the impacts of COVID-19 testing revenue, and excluding the impacts of acquisitions other than PPD and currency translation) was 16%.

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

Revenues at the Life Sciences Solutions segment (35.8% of total revenues) rose 0.7% year over year to $4.23 billion while Analytical Instruments Segment sales (12.8%) improved 9.4% to $1.52 billion.

Revenues at the Laboratory Products and Biopharma Services segment (46%) rose 51.3% to $5.44 billion. The Specialty Diagnostics segment (12.5%) however recorded an 8.2% year-over-year fall in revenues to $1.48 billion.

Margin Analysis

Gross margin of 47.4% in the first quarter contracted 657 basis points (bps) year over year on a 36.4% rise in the cost of revenues.

In the quarter, selling, general and administrative expenses increased 17.2% to $1.81 billion. Research and development expenses were $364 million, up 13.8% year over year.

The adjusted operating margin for the quarter came in at 28.9%, reflecting a contraction of 613 bps.

Financial Position

The company exited the first quarter of 2022 with cash and cash equivalents of $2.75 billion compared with $4.48 billion at the end of 2021.

Cumulative net cash provided by operating activities was $2.20 billion compared with $1.98 billion a year ago.

Meanwhile, Thermo Fisher has a consistent dividend-paying history,with the five-year annualized dividend growth being 14.9%.

Guidance

The company stated that it will come up with its updated 2022 financial guidance on its earnings conference call.

Our Take

Thermo Fisher exited the first quarter with better-than-expected results. The robust year-over-year revenue growth in the Analytical Instruments and the Laboratory Products and Biopharma Services segments appears promising. The revenue contributions from the company’s acquisitions also instill optimism.

However, the year-over-year decline in revenues in the Specialty Diagnostics segment is disappointing. The contraction of both margins does not bode well either.

Zacks Rank and Key Picks

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

Here are a few stocks worth considering, as these have the right combination of elements to beat on earnings this reporting cycle.

Some better-ranked stocks in the broader medical space that have announced quarterly results are Qiagen N.V. (QGEN - Free Report) , UnitedHealth Group Incorporated (UNH - Free Report) and Centene Corporation (CNC - Free Report) .

Qiagen, carrying a Zacks Rank #2 (Buy), reported first-quarter 2022 adjusted EPS of 80 cents, which beat the Zacks Consensus Estimate by 12.7%. Revenues of $628.4 million outpaced the consensus mark by 6.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Qiagen has an estimated long-term growth rate of 11.5%. QGEN’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 11.7%.

UnitedHealth, having a Zacks Rank #2, reported first-quarter 2022 adjusted EPS of $5.49, which beat the Zacks Consensus Estimate by 1.7%. Revenues of $80.1 billion outpaced the consensus mark by 1.9%.

UnitedHealth has an estimated long-term growth rate of 14.8%. UNH’s earnings surpassed estimates in the trailing four quarters, the average surprise being 3.7%.

Centene reported first-quarter 2022 adjusted EPS of $1.83, which surpassed the Zacks Consensus Estimate by 8.9%. First-quarter revenues of $37.2 billion outpaced the Zacks Consensus Estimate by 7.2%. It currently has a Zacks Rank #2.

Centene has an estimated long-term growth rate of 14.2%. CNC has an earnings yield of 6.6% compared with the industry’s 5.6%.

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