Thermo Fisher perfectly rode the tidal wave of demand for health care that came during the pandemic. The company experienced an extremely difficult post-pandemic period, though early evidence shows that the worst is behind it. After trading sideways for three years, the stock’s breakout might just be around the corner.
Thermo Fisher Scientific, Inc. (TMO) is a global leader in serving science, with a broad range of analytical instruments, laboratory equipment, reagents, and consumables. Headquartered in Waltham, Massachusetts, the company stands unique in the industry due to its portfolio of innovative technologies and services that help propel advancement in research, diagnostics, and clinical laboratories. Revenues are generated through the sales of products, service contracts, and custom solutions for pharmaceutical companies, academic institutions, and laboratories.
A workstation in a research lab stocked with laboratory products and services.
The customers served by Thermo Fisher include pharmaceutical and biotechnology companies, academic research institutes, clinical diagnostic laboratories, governmental agencies, and environmental testing organizations. The market flows into the various sectors working on life science research, healthcare diagnostics, environmental monitoring, and industrial quality control.
Thermo Fisher was the pandemic powerhouse, with its products well-aligned to meet the skyrocketing demand for diagnostics and vaccine research. The stock price witnessed a surge during COVID-19. As the pandemic faded, so did the extraordinary spending, sending it back to the pre-pandemic trends. But this contraction is already turning around for the company.
Thermo Fisher finally ended its fourth quarter by posting the first sequential 0.25% sales growth in almost two years showing improvements in health. The bottoming-out margins improved for three consecutive quarters. For a full year, it is being guided to come in at 0-1%, indicating that the cycle’s bottoms may already be in the rearview mirror. Even though its peer Danaher is going down the same track, it still lags.
CEO Mark Casper last quarter gave a cautiously optimistic outlook, suggesting 2025 is the final year of meaningful pandemic-related headwinds. With the diminishing impact of COVID-19 disruption, organic growth may return next year.
Thermo Fisher has come back and positioned itself for better days ahead. Now that margins have stabilized, sales growth is back, and management is hopeful, we believe TMO is a good story. Its ability to adapt and innovate positions it well to capitalize on future opportunities, making this a compelling long-term investment.
TMO is 26th on our latest list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 98 hedge fund portfolios held TMO at the end of the third quarter which was 108 in the previous quarter. While we acknowledge the potential of TMO as a leading investment, our conviction lies in the belief that some 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 as promising as TMO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
