Thermo Fisher Scientific(TMO) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue grew 5% in Q3 to $11.12 billion, with adjusted operating income increasing 9% to $2.59 billion [5][21] - Adjusted operating margin expanded by 100 basis points to 23.3%, and adjusted EPS grew 10% to $5.79 per share [5][21] - Full-year revenue guidance raised to a range of $44.1 billion to $44.5 billion, with adjusted EPS guidance increased to $22.60 to $22.86 per share [17][27] Business Line Data and Key Metrics Changes - In pharma and biotech, mid-single-digit growth was achieved, driven by bioproduction and analytical instruments [6] - Academic and government revenue declined in the low single digits, showing modest improvement [6] - Industrial and applied revenue grew in the mid-single digits, led by electron microscopy [6] - Diagnostics and healthcare revenue growth improved but remained down low single digits, primarily due to conditions in China [6][45] Market Data and Key Metrics Changes - North America grew low single digits, while Europe and Asia-Pacific both grew mid-single digits; China experienced a mid-single-digit decline [21] - The diagnostics market in China faced weak conditions due to pricing and reimbursement challenges, but the impact on the overall business was modest [45][70] Company Strategy and Development Direction - The growth strategy focuses on high-impact innovation, trusted partner status with customers, and a strong commercial engine [7][10] - Collaborations with OpenAI aim to enhance product development and operational efficiency [11][13] - Recent acquisitions, including a filtration and separation business and a Sterile Fill Finish site, are expected to strengthen the company's capabilities in bioprocessing and drug product manufacturing [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating government policies and reshoring activities, which are expected to benefit the company [33][34] - The company anticipates a stable funding environment in the academic and government sectors, which could remove headwinds over time [38] - Overall, management remains optimistic about midterm and long-term growth prospects, maintaining a 3% to 6% organic growth outlook [53][54] Other Important Information - The company repurchased $1 billion of shares in Q3, bringing total repurchases for the year to $3 billion [15][22] - Free cash flow for the year is expected to be around $7 billion, with net capital expenditures projected between $1.4 billion and $1.7 billion [29] Q&A Session Summary Question: Market conditions and customer conversations in pharma - Management noted excitement around scientific breakthroughs and confidence in pipelines, with customers looking to navigate government policies effectively [33][34] Question: Update on academic and government market conditions - Management indicated slight improvement in Europe and stable conditions in the U.S., with potential delays in expenditures due to the government shutdown [37][38] Question: Strengths in analytical instruments - Growth was driven by electron microscopy and chromatography, with a strong underlying health of the business despite headwinds in some segments [44] Question: Impact of China on diagnostics - The company has a smaller presence in China, and while conditions are weak, the impact on overall business is modest [45][70] Question: Demand from small and emerging biotech - There was positive momentum in clinical research and early activities in pharma services, indicating a potential reinvestment cycle [66][67] Question: Onshoring announcements and CapEx implications - Management highlighted incremental demand from new facilities and equipment, but noted that overall drug volumes would remain stable [73][74] Question: Tariff impacts on EPS - The impact of tariffs in Q3 was favorable, with expectations for Q4 to hold steady without significant changes [76][77]