Stock Research and Analysis
by Alex Morozov, CFAThermo Fisher Scientific is a laboratory supply giant with an unmatched breadth of product offerings and the largest salesforce in the industry. The company's efforts to brand itself as a one-stop shop for its research customers as well as lessen its Read more 
Bulls Say
The firm's target market is approximately $70 billion-$80 billion. With 2009 sales expected to reach $10 billion, Thermo Fisher is the largest supplier of research instruments and consumables.
Thermo Fisher is among industry leaders in nearly every product category. The firm is the second-largest manufacturer of mass spectrometry equipment, behind Life Technologies LIFE, and leads the field in manufacturing and distributing reagents and consumables.
Thermo Fisher has invested heavily in R&D, which has resulted in several highly successful product launches. The company's plethora of new products introduced at recent industry trade shows suggests that investment in new products remains a priority even in a tough economic environment.
The company is intensifying sales efforts in Asia, particularly in India and China. While these markets have slowed significantly due to currency depreciation and rough economic environments, growing demand for quality control testing, food safety, and diagnostic devices should provide Thermo with ample growth opportunities.
Thermo Fisher is increasing its internal sourcing efforts. As the company continues to add to its portfolio of products, both internally and through tuck-in acquisitions, the number of Thermo Fisher-brand products should comprise an increasing portion of catalog offerings. Read more
Bears Say
Thermo Fisher's sales growth in part depends on customers' willingness to switch from competitors' products to simplify purchasing decisions. Buyers of high-end equipment, such as mass spectrometry/liquid chromatography platforms, rarely alter their purchasing patterns solely on the basis of convenience and cost.
The diagnostic and instrument industries are consolidating rapidly. Competitors may also look into expanding product lines through acquisitions, which could diminish the effect of Thermo's one-stop shop marketing push. Furthermore, as fewer competitors remain, the firm may run the risk of overpaying for acquisition targets, particularly publicly held companies.
Fisher has historically relied on a modest 3% annual price increase for its consumables. As these products offer very little differentiation and the firm's customers are increasingly looking to lower costs, it may be forced to slash prices.
The company's key customers, large pharmaceutical companies, have undergone significant consolidation in 2009, which exposes Thermo Fisher to customer concentration risk and pricing pressure.
The company's consumable business was adversely affected by inventory destocking in early 2009. While this effect is temporary in nature, the company's customers may elect to maintain their inventories at a reduced level, and revenue boosts due to restocking might not materialize. Read more
Strategy
Thermo Fisher's strategy is to become a one-stop shop for its customers. The combined entity offers a suite of products capable of fulfilling nearly every purchasing requirement of labs and research Read more
Management
We give Thermo Fisher a better than average Stewardship Grade, as its management team deserves much credit for successful completion of the merger of two companies with varying corporate cultures and objectives without losing their industry-leading Read more
Profile
Thermo Fisher is a product of the 2006 merger between Thermo Electron and Fisher Scientific. The company sells scientific instruments and laboratory equipment (30% of sales), Read more
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