1. Thermo Fisher Scientific Inc. (NYSE:TMO)
Number of Hedge Fund Holders: 98
Talking about life sciences equipment and solutions provider, Thermo Fisher Scientific Inc. (NYSE:TMO), Cramer said:
“They make big ticket equipment that these companies need to conduct research, but most of the revenues come from consumables and services for these customers. Regular viewers know that I liked Thermo Fisher for a very long time. It’s been a fabulous performer over the last decade, but it’s struggled ever since the stock peaked at the end of 2021, pulled back hard in 2022…
Now some of this was due to tougher comparisons as Thermo Fisher did great business in 2020 and 2021 as drug companies spent fortunes trying to figure out how to fight Covid. Afterwards, there was an industry-wide inventory glut of their machines because you only need so many in resource labs. Plus, it doesn’t help that we haven’t had many biotech IPOs over the past three years. Normally when biotechs come public, they use the proceeds to buy equipment and materials from companies like Thermo Fisher.”
Cramer noted that while the stock showed improvement in 2023, it fell sharply after a mixed earnings report in October, which included weaker-than-expected revenue and soft guidance for the fourth quarter. He said that the selling continued, exacerbated by a broader healthcare sector decline. However, the one thing that halted the decline was when the company announced a $4 billion buyback program in mid-November, and in early December, revealed that it had already bought back $1 billion of stock.
“I think things will gradually improve for Thermo Fisher with business picking up in 2025 and 2026 and hey, if the IPO market ever comes back to life, there’ll be a new wave of biotech companies coming public and spending their money on life science equipment. Doesn’t hurt that Thermo Fisher now only trades at 22 times next year’s estimate. That’s very low because this is a 30 multiple stock over many years.”
For the third quarter, Thermo Fisher (NYSE:TMO) reported adjusted EPS of $5.28, a decrease from $5.69 in the same period last year, though slightly exceeding expectations. Revenue increased marginally to $10.60 billion, falling short of consensus estimates. The company raised its full-year adjusted EPS guidance to a range of $21.35 to $22.07, up from its previous forecast of $21.29 to $22.07. It also confirmed its revenue guidance of $42.4 billion to $43.3 billion.
While we acknowledge the potential of Thermo Fisher Scientific Inc. (NYSE:TMO) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TMO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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