TMO Stock Rockets To Fresh High Despite Guidance That Calls For Covid Testing Decline
Thermo Fisher Scientific (TMO) crushed guidance expectations for 2022 and beyond on Friday, and TMO stock surged to a fresh high.
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The medical technology company expects to earn $21.16 per share next year — minus some items — on $40.3 billion in sales. That includes $750 million in sales of diagnostic tests, including those that detect Covid. Each additional $100 million in sales could boost adjusted income by 6 cents a share.
“Wow, we are impressed,” Evercore ISI analyst Vijay Kumar said in a report. The “impressive financial targets at (investor day) sets Thermo Fisher apart from peers.”
On the stock market today, TMO stock popped 6.5% to 596.80.
TMO Stock Surges On Long-Term Guidance
The guidance assumes sales will grow more than 12% from expectations for $35.9 billion in 2021 sales. But Thermo Fisher expects Covid testing sales to ramp down. For 2021, testing revenue is expected to be $4.9 billion with $31 billion in core revenue. Testing sales are expected to be $750 million in 2022.
In 2022, adjusted profit would decline 4% from 2021 guidance for $22.07 per share.
Still, both 2022 numbers are well above analysts’ expectations, Evercore’s Kumar said. Thermo Fisher topped his sales estimate by $500 million, mostly due to Covid testing expectations. Kumar called for just $365 million in 2022 testing sales.
Adjusted profit beat TMO stock analysts’ forecast for $20.04 a share, he said.
Thermo Fisher is also in the process of buying a clinical research organization called PPD. The company expects that deal to close no later than Dec. 31.
Later Outlook Beats Whisper Expectations
Thermo Fisher also put up bullish numbers for 2023-25. The company expects core organic revenue to grow 7%-9%.
Evercore’s Kumar noted Thermo Fisher raised its sales guidance “by a whopping 200 basis points. This is the largest increase by the company that we can remember in this decade.”
Peers Danaher (DHR) and Avantor (AVTR) have guided to roughly 5%-7% growth, he said. Further, the high end of the Thermo Fisher outlook even beat whisper TMO stock analysts’ expectations for 8% growth.
In 2025, Thermo Fisher expects to earn $31.04-$31.84 per share. That was also well above Kumar’s forecast. For that year, the company also projected $48.8 billion to $50.8 billion in sales.
“Conclusion: This is a very bullish (investor day),” he said. “We would expect investors to cheer the (long-term guidance), in particular the topline 7%-9%. This now sets Thermo Fisher apart from the rest of the peers in (life science tools) and makes a case for price-to-earnings multiple expansion.”
Kumar kept his outperform rating and 560 price target on TMO stock.
Thermo Fisher stock has a bullish IBD Digital Composite Rating of 95 out of a best-possible 99. This puts TMO stock in the leading 5% of all stocks in terms of key fundamental and technical measures.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
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