With strong market positions in analytical instruments, diagnostics, and drug ingredients, Thermo Fisher Scientific (TMO) was well-situated to benefit from a global pandemic, explains Richard Moroney, editor of Dow Theory Forecasts.

The company also appears primed for the post-pandemic world. As its June-quarter report showed, three factors drive growth: the life sciences industry’s robust fundamentals, strong global economic activity, and the company’s role in the pandemic response.

Thermo Fisher delivered another impressive quarterly report, with both earnings per share, up 44%, and revenue, up 34%, surpassing analyst estimates.

But that’s nothing new for a company that has topped the consensus profit target in 39 straight quarters and sales in 18 straight quarters. Breaking down last quarter’s revenue growth, 28% was organic, 2% came from acquisitions, and 5% came from favorable trends in foreign exchange rates.

Organic sales from Thermo Fisher’s base business rose 27%, with about $1.9 billion linked to the coronavirus pandemic (20% of total sales), down from $2.8 billion in the March quarter (28%).

The pandemic has turbocharged Thermo Fisher’s growth. For the 12 months ended June, the company increased per-share profits 92%, revenue 46%, operating cash fl ow 94%, and free cash flow 98% to $7.77 billion. But it entered the pandemic with excellent operating momentum.

Earnings per share have now risen by double-digits in 21 of the past 22 quarters, while sales have increased in 23 consecutive quarters. Operating profit margin expanded year-over-year for the fifth straight quarter and is now up in 10 of the past 11 quarters.

The firm announced plans to issue $3.1 billion of debt this month to help fund its pending $17.4 billion acquisition of PPD, announced in April. A contract research organization (CRO), PPD performs clinical research and lab services for drug developers.

The deal will push Thermo Fisher — best known for making lab equipment, chemicals, and testing kits — into a $50 billion industry that analysts see growing by mid-single digits over the long haul.

Analyst estimates are rising for both 2021 and 2022. But expectations still seem modest, with the consensus projecting 13% profit growth this year, followed by a 10% decline next year.

The resurgence of coronavirus cases as the Delta variant spreads across the U.S. could boost testing demand and make current analyst estimates unduly conservative. Thermo Fisher is rated as a Long-Term Buy.

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