Medical behemoth Thermo Fisher Scientific chopped its 2023 outlook for the second time this year, and TMO stock slumped, continuing a two-month sell-off.
The company is a massive player in the life sciences tools and equipment arena. But the macro environment is throwing Thermo Fisher for a loop. Now, Thermo Fisher expects to earn $21.50 per share, on an adjusted basis, on $42.7 billion in sales. At the midpoint, that's $1 and $1 billion lower, respectively, than the guidance Thermo Fisher issued three months ago.
Thermo Fisher also lowered its outlook three months ago.
The new guidance implies Thermo Fisher will miss Wall Street's current fourth-quarter views, RBC Capital Markets analyst Conor McNamara said in a report.
"Our claim that the company was unlikely to guide down two quarters in a row — after cutting guidance only three times in the last roughly 20 years — proved to be overly optimistic," he said.
On the stock market today, TMO stock skidded 5.5% to close at 433.18.
TMO Stock Continues Its Steep Sell-Off
Overall, the third quarter came out mixed for Thermo Fisher. Adjusted earnings climbed 12% to $5.69 per share and topped FactSet-polled analysts' forecast for $5.61. Sales came in at $10.57 billion, down 1% and narrowly below expectations for $10.6 billion.
On an organic basis, revenue slipped 3%. But Thermo Fisher says core organic sales climbed 1%.
Thermo Fisher includes revenue from its Covid products in its core business, which differs from most medical companies with ties to the pandemic. Covid tests brought in $500 million in sales, down 4%. The company doesn't note the sales accrued from the tools it sells to vaccine makers.
But Evercore ISI analyst Vijay Kumar says the Covid business could be to blame for the guidance haircut. He has an outperform rating and 540 price target on TMO stock.
"Excluding vaccine headwinds, we think the updated guide translates to about 3% base organic (growth) at the midpoint," he said in a report. "While these number changes may look drastic, the underlying organic (growth) is in line with peers."
It also implies base organic growth of 4% for the fourth quarter, which is in line with the expected 6% growth from fellow medical giant Danaher, Kumar said.
"All in, these results seem consistent with peers, and relative underperformance over the past three months seems a bit overdone," he added.
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