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Thermo Fisher Scientific TMO is an attractive stock to buy today for several reasons. For one, this wide-moat company generates robust cash flows as the leading supplier in life sciences. In addition, management has done an exceptional job of capital allocation by maintaining a solid balance sheet and executing a flawless acquisition strategy. Thermo Fisher also recently reported strong first-quarter results and proactively reduced its full-year guidance after incorporating the direct impact of tariffs on its revenue and profitability. Best of all, the stock looks cheap, trading 35% below our fair value estimate. Thermo Fisher is one of the wide-moat names on our Best Companies to Own list. It’s also one of Morningstar chief US market strategist Dave Sekera’s 4 Long-Term Stocks to Buy on the Dip.
Thermo Fisher is weathering the pullback in global biopharmaceutical spending and China softness better than most of its peers. Being the premier life sciences supplier and having an unmatched portfolio of products, resources, and manufacturing capabilities has allowed the firm to retain and expand its wallet share among its customers across all channels. We expect the current budget-constrained environment to slowly ease. Thermo Fisher remains in a great position to leverage its share gains in the biopharma channel and capitalize on strong long-term demand. We anticipate the penetration of all its customer channels to grow, aided by its expansion into contract research and manufacturing. We also think the company’s global reach will continue to resonate, and its already strong presence in rapidly growing emerging markets will expand further.
Key Morningstar Metrics for Thermo Fisher
Economic Moat Rating
Thermo Fisher has a wide economic moat supported by its ongoing acquisition strategy. Only a handful of other life sciences companies have the balance sheet to support comparable large deals. Strategically, acquisitions have been an enormous boon for the company’s competitive positioning. There are only limited product gaps now in offerings to the life sciences research sector, which has allowed the firm to steadily gain wallet share. The one-stop-shop approach, made possible in part by acquisitions, affords Thermo Fisher pricing flexibility and results in strong customer relationships. Its large pharma clients see sizable benefits in the simplified procurement process that it offers. As a result, its penetration and entrenchment in the pharma end market are expanding, and we expect this to continue.
Read more about Thermo Fisher’s moat rating.
Fair Value Estimate for Thermo Fisher Stock
Our fair value estimate is $630 per share. We anticipate the constrained environment will gradually ease, but the company isn’t likely to return to historical growth levels this year. In a normalized environment, we forecast Thermo Fisher’s sales will increase approximately 5%-6% per year organically, boosted by the faster-growing contract research organization segment and wallet share gains. We expect the analytical instruments and life sciences segments to drive future growth, while the mature catalog business will provide cash flows to fund investments in growth areas like clinical trials. We anticipate Thermo Fisher’s adjusted operating margin will steadily improve over the next five years. We use a 7% cost of capital in our assumptions.
Read more about Thermo Fisher’s fair value estimate.
Risk and Uncertainty
Current biopharma spending is somewhat constrained and will likely remain muted throughout 2025. The firm’s exposure to industrial end markets leads to some cyclicality in its revenue stream; the semiconductor business in particular could be severely affected if industry spending declines. If the company’s key environmental instruments target markets—China and India—reduce their environmental quality testing due to fiscal concerns or currency headwinds, this could more than offset Thermo’s recovery in the life sciences market. The company faces competition in its analytical instruments business, particularly from low-end manufacturers. Thermo also depends on research activity from academia and government and could be adversely affected by delays or cuts in funding from the National Institutes of Health.
Read more about Thermo Fisher’s risk and uncertainty.
Thermo Fisher Bulls Say
Thermo Fisher is among the industry’s best when it comes to cost control. As near-term spending is constrained, the company’s margins show exceptional resilience.PPD is growing at above-market rates, implying share gains. The company’s scale and reach have boosted performance in this already-attractive business.Thermo Fisher is successfully implementing price hikes in its portfolio, offsetting inflation pressures.
Thermo Fisher Bears Say
The company was able to fuel its acquisition spree via access to extremely inexpensive debt. Generating excess returns on acquisitions in a less favorable interest-rate environment might be more challenging.Thermo Fisher’s 2024 performance was materially affected by weakness in China, and 2025 will remain muted.While a smaller portion currently, a presence in the industrial end market exposes the company to macroeconomic headwinds.
This article was compiled by Susan Dziubinski and Sylvia Hauser. Data as of May 7, 2025.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.