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Thermo Fisher (TMO) at a 52-Week High: What's Driving It?

Zacks Equity Research

On Dec 6, shares of Thermo Fisher TMO scaled a new 52-week high of $321.60, closing the session marginally lower at $320.12. In fact, the stock has rallied nearly 7.8% since its third-quarter earnings announcement on Oct 23.

Strength in majority of end markets, solid international performance and impressive full-year guidance prompted the rally.

Let us take a closer look at the factors driving growth.

Robust Q3 Earnings

The company exited the third quarter on a promising note, with better-than-expected earnings and revenue numbers.Revenues for the quarter improved 12.2% year over year, driven by robust performances by Life Sciences Solutions, Analytical Instruments and Laboratory Products and Services segments.

Adjusted operating margin for the quarter was 22.5%, reflecting an expansion of 27 basis points (bps).

The lifted revenue and adjusted EPS outlook for 2019 buoys optimism among investors, indicating the continuation of this bullish trend through the rest of the year.

Other Encouraging Factors

In October 2019, Thermo Fisher completed the acquisition of an active pharmaceutical ingredient manufacturing facility from GlaxoSmithKline for €90 million.The company also started benefiting from the synergy of the recently-acquired HighChem, a small business that broadens the former’s mass spectrometry software portfolio.

Moreover, investors are optimistic about the company continuing to strengthen its foothold in several emerging markets. In the third quarter of 2019, China has been the biggest contributor, with the company registering 30% growth rate in the country.

In September, the company launched the next-generation Thermo Scientific DXR3 Family of Raman Spectrometers and Microscopes. Around the same time, it entered into an agreement with Eli Lilly and Company for the development of a companion diagnostic that will utilize the FDA-cleared, next-generation sequencing-based Oncomine Dx Target Test to identify certain non-small cell lung cancer and thyroid cancer patients who may be treated with Lilly's investigational therapy, LOXO-292.

Meanwhile, Thermo Fisher has been having a great run on the bourses in the past year. The stock has rallied 35%, higher than the broader industry’s growth of 13%. The company currently has a market cap of $128.37 billion.

Zacks Rank & Stocks Worth a Look

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

A few better-ranked stocks from the broader medical space are Haemonetics Corporation HAE, NuVasive, Inc NUVA and ResMed RMD. While ResMed sports a Zacks Rank #1 (Strong Buy), the other two carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Haemonetics has a projected long-term earnings growth rate of 13.5%.

NuVasive has an expected long-term earnings growth rate of 10.9%.

ResMed has a long-term earnings growth rate of 12.9%.

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