It has been about a month since the last earnings report for Thermo Fisher Scientific (TMO Quick QuoteTMO - Free Report) . Shares have added about 10.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Thermo Fisher due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Thermo Fisher Q3 Earnings Top Estimates, Margins Up

Thermo Fisher Scientific’s third-quarter 2023 adjusted earnings per share of $5.69 topped the Zacks Consensus Estimate by 1.9%. The figure also rose 12% year over year.

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

GAAP earnings per share was $4.42, up 16.6% on a year-over-year basis.

Revenues in Detail

Revenues in the quarter totaled $10.57 billion, down 0.9% year over year. The top line surpassed the Zacks Consensus Estimate by a marginal 0.04%.

Segment Details

Organic revenues in the reported quarter were 3% lower, while Core organic revenue growth was 1%.

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

Revenues in the Life Sciences Solutions segment (23% of total revenues) declined 17.9% year over year to $2.43 billion, while Analytical Instruments Segment sales (16.6%) increased 8.2% to $1.75 billion.

Revenues in the Laboratory Products and Biopharma Services segment (54.2%) rose 2.6% to $5.73 billion. The Specialty Diagnostics segment (10.2%) recorded a 2.3% year-over-year rise in revenues to $1.08 billion.

Margin Analysis

The gross margin of 41.9% in the third quarter expanded 39 basis points (bps) year over year despite a 1.6% rise in the cost of revenues.

In the quarter, selling, general and administrative expenses fell 9.5% to $1.58 billion. Research and development expenses declined 9.1% to $319 million.

The adjusted operating margin in the quarter came in at 23.9%, reflecting an expansion of 206 bps.

Financial Position

The company exited third-quarter 2023 with cash and cash equivalents of $6.15 billion compared with $8.52 billion at the end of second-quarter 2023.

Cumulative net cash from operating activities was $4.68 billion compared with $5.67 billion a year ago.

Thermo Fisher has a consistent dividend-paying history, with the five-year annualized dividend growth being 16.41%.

Guidance

Thermo Fisher updated its full-year 2023 guidance.

The company now expects 2023 revenues to be $42.7 billion, with Core organic revenue growth of 1%. The Zacks Consensus Estimate for the same is pegged at $43.43 billion.

The adjusted EPS is projected to be $21.50. The Zacks Consensus Estimate for the metric is pegged at $22.22 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -12.25% due to these changes.

VGM Scores

At this time, Thermo Fisher has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Thermo Fisher has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.