We have retained our ‘Neutral’ rating on Thermo Fisher Scientific, Inc. (TMO) with a target price of $55 based on a P/E of 16.2 and our fiscal 2010 EPS estimate of $3.39. The company’s results for the fourth quarter and fiscal 2009 were mixed.
 
Thermo Fisher Scientific reported fourth-quarter earnings per share of 91 cents, surpassing the Zacks Consensus Estimate of 88 cents and the year-ago earnings of 87 cents. For fiscal 2009, earnings per share were $3.05, compared to the Zacks Consensus Estimate of $3.02 and $3.13, a year ago.
 
In the fourth quarter, total revenues increased 7% year over year to a record $2.84 billion. Growth was fueled by acquisitions and a favorable foreign currency translation. Analytical Technologies revenues increased 5% year over year to $1.19 billion. Laboratory Products and Services revenues increased 9% year over year to $1.77 billion. Thermo Fisher follows the practice of reporting inter-segment revenues, which were a negative $126.8 million in the reported quarter.
 
Thermo Fisher witnessed a contraction in margins in the fourth quarter. Gross margin declined 20 basis points (bps) year over year to 41.3%. Adjusted operating and net margins declined 60 bps and 40 bps year over year to 18.0% and 13.6%, respectively. Both adjusted operating and net margins exclude amortization of acquisition-related intangible assets and other acquisition-related costs; restructuring costs; and related tax benefits.
 
In fiscal 2009, total revenue declined 4% year over year to $10.11 billion, partly due to an unfavorable foreign currency translation. Analytical Technologies revenues declined 7% year over year to $4.15 billion. Laboratory Products and Services revenues were roughly flat year over year at $6.43 billion. Inter-segment revenues were a negative $470.8 million.
 
Headquartered in Waltham, Massachusetts, Thermo Fisher Scientific Inc. was formed through the merger of Thermo Electron Corporation with Fisher Scientific International Inc. in November 2006. Thermo Fisher Scientific serves customers through two principal brands, Thermo Scientific and Fisher Scientific.
 
Thermo Fisher offers a wide range of products and technology to its customers. This differentiates the company from its peers giving it a competitive edge.
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