Biotech Values

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(TMO)—Woes in the biotech “tools” sector continue…

http://www.reuters.com/article/2011/10/26/thermofisher-idUSN1E79O24720111026
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›Thermo Lowers Forecast Amid Challenging Conditions

Wed Oct 26, 2011 1:00pm EDT
By Bill Berkrot

Oct 26 (Reuters) - Thermo Fisher Scientific Inc lowered its full-year earnings and revenue forecast on Wednesday, citing weakness in academic and government markets and less favorable foreign exchange rates.

Thermo shares fell nearly 10 percent to their lowest in more than a year.

Morningstar analyst Alex Morozov said Thermo management may have previously been too optimistic in their outlook, given that many smaller rivals in the life sciences tools sector have been hit hard by slowdowns in academic and government spending.

"It seems that the company was caught a little bit flat-footed," Morozov said.

The maker of scientific instruments, diagnostics and environmental testing equipment now expects 2011 earnings of $4.11 to $4.17 per share, down from its prior view of $4.15 to $4.25. [Objectively, this isn’t that big of an adjustment, but many stocks are getting creamed for slight weaknesses in the quarterly results or outlook.] It expects revenue of $11.62 billion to $11.70 billion, down from an earlier forecast of $11.79 billion to $11.89 billion.

"The downward revision in guidance is a lot steeper than folks were expecting. There are obviously a lot of moving parts, but I think folks were really blindsided by the magnitude of the slowdown in academic end markets for Thermo," Morozov said.

Academic and government customers account for nearly a quarter of Thermo Fisher revenue.

"The second half of the third quarter we saw a real softening in government and academic markets," Chief Executive Marc Casper told Reuters in a telephone interview.

"We believe that, for the fourth quarter, the conditions in academic and government are going to stay pretty similar to what we saw in Q3. We're managing through it."

Economic uncertainty in the United States and Europe have left academic and government customers with no real clarity as to what their budgets will be, he added.

Thermo posted a third-quarter net profit of $265.4 million, or 69 cents per share, compared with $268.5 million, or 66 cents per share, a year earlier. Excluding items [i.e. on a non-GAAP basis], Thermo earned $1.07 per share, matching analysts' average expectations, according to Thomson Reuters I/B/E/S.

Revenue for the quarter rose 13 percent to $2.97 billion, roughly in line with Wall Street estimates of $2.99 billion.

Casper said growth from industrial markets was very strong and that biopharma and healthcare diagnostics has been stable and growing.

"So in 75 percent of the business the end markets are quite strong and we have a short term blip that we're working through with academic and government," the CEO said.

Thermo said the integration of the Phadia specialty diagnostics company it bought for $3.5 billion was going well.

The Waltham, Massachusetts-based company, which previously reported its results in two units, has added a specialty diagnostics segment, due in part to the Phadia acquisition.

Analytical technologies sales rose 22 percent to $1.01 billion, while laboratory products and services revenue increased 5 percent to $1.48 billion. Specialty diagnostics revenue rose 20 percent to $615 million in the third quarter.

While the European market is likely to remain weak until the debt crisis is sorted out, Casper said the Asia-Pacific region was very strong. "China and India both grew again over 20 percent. It was real bright spot for the quarter," Casper added.‹