NEW YORK (GenomeWeb News) – Thermo Fisher Scientific today said that revenues for the third quarter grew 13 percent to $2.97 billion, but lowered its revenue and EPS estimates for full-year 2011 reflecting weakness in the academic/government market.
Revenues for the three months ended Oct. 1 compare to $2.63 billion from the year ago period and missed analyst estimates of $3 billion for the quarter.
Organically, revenues grew 3 percent year over year.
By segment Analytical Technologies grew to $1.01 billion, up 22 percent from $827.9 million for Q3 2010, while Laboratory Products and Services rose 5 percent to $1.48 billion from $1.41 billion. The newly created Specialty Diagnostics segment posted sales of $614.7 million, a 20 percent jump from $513.1 million the segment would have reported a year ago.
On a conference call following the release of the company's results much attention was focused on Thermo Fisher's academic/government business, which during the quarter fell at a mid-single digit clip.
The market represents 23 to 24 percent of the company's total revenues and company officials said the slowdown is expected to continue in the fourth quarter, as Congress continues figuring out the 2012 budget and Europe continues trying to get a handle on the fiscal crisis there.
On the call Thermo Fisher President CEO and Marc Casper said there appears to be no "huge catalyst" to spur on growth in academic/government spending moving forward, and in the US in particular, a "lack of clarity on budgets is the driver" behind the slowdown.
"[O]nce that gets a little more clarity, I think customers will get a little more confidence to spend on bigger ticket items," he said.
The brunt of the slowdown was borne by the Laboratory Products and Services segment with spending on capital equipment and instrument most adversely affected, CFO Pete Wilver said. Among the products negatively impacted were mass spectrometers, chromatography systems, and spectroscopes, Casper added.
The company has initiated cost-reduction initiatives to mitigate the effects of the softness in that market, "and we are continuing to drive additional actions in Q4," he said, adding the firm has put in place "very targeted share gain action plans to maximize our performance in this segment."
Those efforts and an incremental restructuring action have resulted in about $30 million in annualized savings, Wilver said.
As a result of the softness in the academic/government market, as well as less favorable foreign currency exchange rates, the company lowered its guidance today. For full-year 2011, earnings per share guidance was brought down to a range of between $4.11 and $4.17 from an earlier guidance of $4.15 to $4.25 given during the second quarter. The new range would represent growth of between 19 percent and 21 percent from 2010 levels.
Full-year revenue guidance was reduced to a range of between $11.62 billion and $11.70 billion from $11.79 billion and $11.89 billion, which would represent a 10 percent to 11 percent growth rate over 2010.
Outside of the academic/government market, Thermo Fisher's biopharma services and bioprocess production businesses saw a "strong" quarter, Casper said, with customers collaborating with the company "much more closely" to drive up productivity.
He also said that the HPLC business is "clearly gaining share" from competitors, as a result of Thermo Fisher's purchase of Dionex in May. The business saw double-digit revenue growth year over year for the quarter.
The company's new immuno-diagnostics business, created by the acquisition of Phadia, grew 10 percent year over year, Casper said. The integration of the Phadia business into the fold is going "very smoothly and the business is continuing to deliver strong growth, so it's off to a great start."
Thermo Fisher's R&D spending spiked 21 percent to $86.8 million from $71.5 million a year ago, while SG&A costs increased 19 percent to $682.6 million from $574.1 million.
The firm's net income rose to $265.4 million, or $.69 per share, down 1 percent from $268.5 million, or $.66 per share, a year ago. On an adjusted basis, EPS was $1.07, matching Wall Street estimates.
During the third quarter, Thermo Fisher deployed $225 million to buy back 4 million shares of its stock. In the first nine months of 2011, the company has repurchased 17.4 million shares for about $1 billion.
In morning trade on the New York Stock Exchange shares of Thermo Fisher were down 10 percent at $47.88.