Thermo Fisher Long Case: Trajectory Is Clear, Buy On Value

8/3/20

By Zach Bristow, SeekingAlpha

Summary

  • Strong quarter exit and clear guidance for Q4 2020 on the back of $1.3 billion in COVID-19 related sales YTD.
  • 16% dividend increase and commitment to fulfil annual dividend with sustainable coverage over future payouts and debt facilities.
  • Earnings surprises on EPS and revenues 8 out of 8 quarters over the last 2 years most recently beating EPS by $1.
  • Evidenced fundamental momentum with 138% total returns over the single-year period to date.
  • There is a strong buy case at the current valuation with the share price hitting an all-time high in July 2020; here, we present arguments for the same.

Investment Thesis

We are extremely bullish on Thermo Fisher Scientific (NYSE:TMO) and believe that the company has the fundamental momentum coupled with the economic pillars to provide shareholders excellent total returns in the coming periods.

Currently, the market views TMO as one of the most promising entities within the pharmaceuticals, medical supplies and biotechnology sector(s); as such, share price has seen momentum of 48.5% on 4.13% risk to the downside since the market selloff in March. Shareholders have also enjoyed 138% in total returns over the 3-year period to date with a 5.8% downside risk on monthly returns over the same term (monthly returns utilised for the scope of medium to long-term players).

Data Source: Market Data; Author's Calculations

Moreover, earnings results for Q2 2020 were recently posted on July 22 with pleasing results for shareholders, beating revenue expectations by $9.17 million and EPS by $1.00, whilst currently trading at its all-time high of $407.36 (at time of writing), registering a YoY holding period total return of 44.33% to today's date, and thus presenting an exciting entry point for those considering a longer horizon. The company has also outperformed the greater market total return by 26.1% YTD and has elicited 23.6% returns over the S&P 500 Health Care Sector over this same period.

ChartData by YCharts

The company has delivered said returns on a background of many factors; including, but certainly not limited to:

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