Is Thermo Fisher Stock a Buy Sell or Hold?

Nowadays, a doctor doesn’t just look at you and prescribe meds. The healthcare setup is hinged a lot on diagnostics at the moment. Better tests translate to better care for patients. Thermo Fisher Scientific Inc. (NYSE:TMO) is a pioneer in this part of the market and is seeing some tailwinds from the general rise in the popularity of diagnostics over the years.

Over the past 10 years, Thermo Fisher’s stock is up by more than 330%. Yet, recently, the stock market has not been kind to the company. The share price has been in the red to the tune of more than 8% over the past six months. While this is not a free fall by any standards, the company’s stock is seeing some weakness. We take a deep dive into Thermo Fisher’s market and prospects to see whether the stock is a buy sell or hold?

What Is Going On in the Market For Diagnostics?

There’s a new paradigm facing the diagnostics market at the moment, which is automation.

Labs and their equipment are becoming highly automated. AI has made medical imagery much more accurate than the past. The advanced tools are gaining FDA approvals, particularly in the field of radiology.

The global surge in diseases like cancer, diabetes, and respiratory ailments are also near-term factors that prop up the diagnostics market. As the talk of the town, the global clinical diagnostics market is expected to expand at a CAGR of 6.6% from 2024 to 2030. 

Thermo Fisher Financials Are So-So

Management reported a 5% jump in Q4 revenues to $11.40 billion. For the year, the top line was fairly stable when compared to the year prior’s number of $42.88 billion. Both of these numbers eclipsed analysts forecasts and the earnings beat triggered a share price pop. The analytics segment was the primary growth driver.

Operating expenses were elevated in the fourth quarter, coming in at $9.38 billion, which was up by 4% year-over-year while margins dipped slightly from 83% to 82.3%.

This also led to a 9% rise in its operating income to $2.02 billion, and operating margin also took a leap from 17% to 17.7%.

On an adjusted basis, Thermo Fisher’s earnings per share increased by 8% from the prior year’s period to $6.10, which was higher by a modest margin than what the analysts were expecting. So, at this point, the company’s financials are holding strong.

Is Thermo Fisher’s Dividend Worth It?

Thermo Fisher generates significant cash to keep its dividend afloat. Yet, it must be mentioned that in the last reported quarter, free cash flow declined by 15% from the prior year’s period to $2.83 billion.

The company does have a growing dividend, on the other hand, which has accelerated its dividend payouts over the recent past. Thermo Fisher last declared a quarterly dividend of $0.39 per share, which was paid to shareholders on January 15, 2025. This sums up to an annual dividend of $1.56 per share and yields 0.29% on prevailing prices.

Over the past three years, Thermo Fisher’s dividend payouts have grown at a compound annual growth rate of 14.5%, while over the past five years, this figure stands at 15.5%. This is also not something the company has been experiencing recently, as it has seven consecutive years of dividend growth under its belt.

What Can We Expect from Thermo Fisher Scientific Now?

On the other hand, Thermo Fisher’s rival firm Danaher Corporation (NYSE:DHR) has indicated that despite rate cuts, biotech clients, especially the smaller ones, are still cautious with their investments. Thermo Fisher now expects its adjusted profit for fiscal 2025 to fall between $23.10 and $23.50 per share. Analysts are expecting the low end of this range ($23.10 per share).

Contrarily, the company’s stock doesn’t come particularly cheap. Its price is sitting at 23.37x its forward non-GAAP earnings, which doesn’t exactly run below the industry average.

Is Thermo Fisher Stock a Buy Sell or Hold?

Thermo Fisher stock is a Buy with upside opportunity to $664 per share, at least in the eyes of the 29 analysts who cover the stock.

When we look to a discounted cash flow forecast analysis the numbers are substantially less optimistic with a fair value target price of $490 per share, suggesting nearly 8% risk to the downside.

Still, bulls can point to management’s aggressive share buyback as signal conviction that insiders think the share price is undervalued relative to intrinsic net worth. And with no interruption in profitability anticipated, they might well be right.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.