We think the healthcare industry will enjoy great success over the next decade. Due to the nature of the business, results will vary widely and unpredictably from one company to another. A volatile market like the one we expect for healthcare stocks will include winners and losers. We expect Thermo Fisher Scientific to be among the big winners.
That’s because this top pick continues to introduce new products as well as upgrades to its existing offerings. That’s key to maintaining its market-leading position, and that position justifies its valuation at 25.6 times forecast earnings.
What’s more, this firm’s shares are now up 90.4% for our subscribers since we first recommended the stock in the May 2020 issue of Power Growth Investor at $325.83 a share. We still think it has room to move higher – in fact, the shares have returned 13.8% in 2024 alone. It’s a Power Buy.
THERMO FISHER SCIENTIFIC INC. (Symbol TMO on New York) is a leading manufacturer of scientific instruments, laboratory equipment, diagnostic consumables, and life science reagents.
Thermo Fisher recently introduced the TSX Universal Series ultra-low temperature (ULT) freezer. This latest development builds on 80 years of experience.
Laboratories require reliable and effective cold storage solutions for their samples to advance critical research, adequately store samples or accelerate the development of new therapies.
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Notably, the TSX Series ULT platform now offers medical device units for the first time to store and preserve blood and blood products at freezing temperatures between -40°C and -86°C. Strong demand for blood and cell components for transplantation and transfusion in cancer therapies is leading the market growth of laboratory freezers.
In response to this and other earlier product developments, the shares are now up 90.4% for our subscribers since we first recommended the stock in the May 2020 issue of Power Growth Investor at $325.83 a share. We still think they have room to move higher.
Meanwhile, Thermo Fisher recently announced the expansion of its central laboratory operations in Kentucky under its clinical research business.
The new 65,000-square-foot space in Covington, Kentucky, will expand the company’s sample management and biorepository operations. The latest development will be in addition to its existing site in nearby Highland Heights.
The new laboratory building involves a $47.8 million investment, with renovation and construction expected to start later this year.
Growth Stocks: Company raises forecasts after a mixed quarterly result
In the quarter ended June 30, 2024, Thermo Fisher’s revenue fell 1.0%, to $10.54 billion from $10.69 billion a year earlier. The decline was partly due to lower revenue from COVID-related sales of testing equipment as the pandemic eased.
Excluding one-time items, per-share earnings climbed 4%, to $5.37 from $5.15. The company was able to successfully cut costs.
The shares trade at 25.6 times forward 2025 earnings, a reasonable multiple in light of the company’s expansion potential from its new operations.
Meanwhile, the firm recently raised its quarterly dividend by 11.4% with the April 2024 payment, to $0.39 a share from $0.35. The stock now yields 0.3%.
Overall, Thermo Fisher has relied on acquisitions for growth; it also has a high p/e and low yield. That combination leaves the company’s shares vulnerable to a sharp setback on bad corporate news or overall stock market weakness.
Still, the company’s success with health technology could produce substantial gains.
Recommendation in Power Growth Investor: Thermo Fisher Scientific Inc. is a buy.
