Thermo Fisher Stock Rises on Solid Q2 Growth Expectation

Thermo Fisher Scientific TMO, which is slated to release its second-quarter 2020 earnings on Jul 22 before market open, recently provided its Q2 outlook. Notably, in April, the company withdrew its 2020 guidance due to uncertainties surrounding the COVID-19 pandemic-led crisis and related customer impact.

Per the latest company release, going by the currently available information, Thermo Fisher expects second-quarter reported and organic revenue growth (excluding the impact of acquisitions and divestitures and foreign currency translation) to be approximately 10% year over year. The Zacks Consensus Estimate for reported revenues is pegged at $5.73 billion.

According to Thermo Fisher, this organic growth projection exceeds the company’s earlier expectation banking on strong global sales of PCR-based tests and other products and services supporting the COVID-19 response, which contributed more than $1.4 billion of revenues in the second quarter.

Following this announcement, shares of the company rallied nearly 4.5% to $382.3 on yesterday’s close

COVID-189 Tests Contribute to Growth

On Mar 26, the company announced that its diagnostic test developed for the detection of nucleic acid, exclusively from SARS-CoV-2 received the CE mark in the European Union. Thermo Fisher has begun ramping up production to meet growing global demand. The company expects the subsequent huge market acceptance of this test to help the company partially mitigate some of the revenue loss in other businesses.

We note that as a remarkable breakthrough in the first half of March, Thermo Fisher successfully attained EUA from the FDA for this diagnostic test to be used by the CLIA high-complexity laboratories in the United States. The authorized test utilizes the Applied Biosystems TaqPath Assay technology and has been developed to deliver patient outcomes within four hours of a sample reaching a laboratory. This authorization was amended on Mar 24 to include additional instruments, such as the company's Applied Biosystems 7500 Fast Real-Time PCR System. This boosted testing capabilities in the United States from approximately 1,000 instruments to more than 3,000 instruments on which Thermo Fisher's diagnostic test can be run.

Further, in terms of the development of treatments and vaccines, Thermo Fisher is partnering with a number of Pharma and biotech customers who are working on pandemic related projects. Its pharma services network is working to produce existing drugs that are showing some effectiveness in treating COVID-19.

Share Price Performance

Thermo Fisher has outperformed its industry in the past six months. The stock improved 16.7% versus the industry’s 9.3% decline.

Zacks Rank & Other Key Picks

Currently, Thermo Fisher carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks from the broader medical space are Quest Diagnostics Incorporated DGX, Laboratory Corporation of America Holdings LH or LabCorp and QIAGEN N.V. QGEN.

Quest Diagnostics’ long-term earnings growth rate is projected at 7.6%. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

LabCorp’s long-term earnings growth rate is estimated at 6.1%. The company presently sports a Zacks Rank #1.

QIAGEN’s long-term earnings growth rate is estimated at 12.2%. It currently sports a Zacks Rank #1.

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