Thermo Fisher set to benefit from demand for testing kits, vaccines
Thermo Fisher Scientific Inc's third-quarter profit is likely to get a boost from a rebound in COVID-19 testing due to the highly contagious Delta variant and sustained demand for vaccines against the coronavirus, Wall Street analysts said.
In July, when cases eased in the United States, the company cut its annual sales forecast for COVID-19 tests by $900 million. But the demand has again picked up pace in recent months amid a surge in Delta-led infections.
The world's largest maker of scientific instruments, which also supplies raw materials for COVID-19 vaccines and therapies, may see some benefit from the United States authorizing booster doses for some age-groups.
However, Thermo Fisher is unlikely to lift its testing forecast, according to Atlantic Equities analyst James Mainwaring, as it shifts its focus to its core business of making scientific instruments used in pharmaceutical and academic research.
The business took a hit last year as the pandemic disrupted research activities, but showed a strong recovery in the second quarter.
THE CONTEXT
Demand for test kits from employers in the United States have surged in the past few months and has even resulted in a supply crunch as the U.S. government mandated big employers to inoculate their workers and test them every week.
Last week, rival Abbott Laboratories raised its 2021 profit forecast due to the recent uptick in testing demand. However, Quest Diagnostics warned of a slowdown in demand through the rest of the year as infections decline.
THE FUNDAMENTALS Thermo Fisher is expected to report third-quarter revenue of $8.39 billion on Oct. 27, according to the mean estimate from 15 analysts, based on Refinitiv data
Thermo Fisher reported overall second-quarter sales of $9.27 billion.
WALL STREET SENTIMENT The current average analyst rating on Thermo Fisher shares is "buy", with eight analysts rating it "strong buy", 12 "buy" and two "hold".
Wall Street's median 12-month price target is $670
The company's shares have risen about 30.5% so far this year
RELATED Novartis says may divest generic drugs unit Sandoz