Thermo Fisher Scientific Inc. (TMO) — This company is a leading manufacturer and developer of analytical and laboratory instruments for life science, drug discovery and industrial uses. Its focus is on the high-growth medical and pharmaceutical industries.
On July 22, the company reported second-quarter adjusted earnings per share (EPS) rose 6.9% year over year to $1.84, beating analysts’ estimates. Despite strong sales increases in North America, Europe and China, revenue fell 1.2% to $4.27 billion, primarily due to currency-related issues. However, operating margins expanded by 90 basis points.
For 2015, Capital IQ estimates operating margins will increase 70 basis points. Its analysts forecast earnings of $7.35 per share this year and $8.16 next year.
Following the Q2 earnings report, Capital IQ increased its 12-month price target for TMO stock by $8 to $154 based on its “growth profile and leading market share.” Its analysts also reiterated their “buy” rating on shares.
Technically, TMO stock broke from a right triangle early this month, jumping from around $131 to a new all-time high at $141.25. Market conditions appear to have resulted in a round of profit-taking that could drop shares below their 50-day moving average at $131.60.
Therefore, my buy point for TMO stock is $130, just below the moving average and breakout point, and just above support at its 200-day moving average at about $128.
At $130, TMO stock would trade at a modest P/E ratio of 17.8 times Capital IQ’s 2015 earnings estimate. The four-month target for this trade is $150, which would result in a gain of 15%.
