This story has been updated to include additional statement from Thermo Fisher Scientific.
NEW YORK – Thermo Fisher Scientific said Wednesday that it is lowering its 2025 guidance for adjusted earnings per share to reflect the changing macroeconomic environment, especially the impact of tariffs between the US and China and other policies implemented by the Trump administration.
For the full year, the Waltham, Massachusetts-based firm now expects adjusted earnings per share (EPS) to be between $21.76 to $22.84 for the year, versus the previous range of $23.10 to $23.50.
Revenues in 2025 are expected to be in the range of $43.3 billion to $44.2 billion, compared to the prior range of $43.5 billion to $44.0 billion.
"We have all seen a tremendous pace of change in the world since we provided our guidance on January 30th," CEO Marc Casper told investors during a call recapping the company's first quarter financial results. "The two main elements of the macro changes since then are tariffs and the changes driven by the current policy focus of the US administration."
At the midpoint, the new revenue guidance remains the same as that of the previous range, reflecting an organic growth range of 1 percent to 3 percent. Meanwhile, the updated adjusted EPS guidance is $1.00 lower at the midpoint versus that of the previous guidance.
According to Thermo Fisher CFO and Senior VP Stephen Williamson, $.70 of the change is driven by the ongoing tariffs between the US and China, while the remaining $.30 is caused by the "current policy focus of the current administration," though he did not further specify the exact policies.
"The tariff rates here are so substantial that they are likely to significantly reduce the volume of trade between the two countries," Williamson told investors. "We expect this will impact the sales of our products in China that are produced by our facilities in the US" as well as increase the cost of China-sourced parts and materials.
Due to the current impact of the China-related tariffs, Thermo Fisher assumed a $400 million reduction in revenues for the new guidance, Williamson said.
During the Q&A portion of the call, Casper told investors that Thermo Fisher only produces "a small minority" of its products that are sold to China in the US. "But our assumption is effectively [that] it goes to zero until we can mitigate supply chains, which we can do quite aggressively, but this takes time, to move production to other sites," he noted.
In terms of changes in US policy focus, Williamson said the largest impact is likely to come from US academic and government customers. Due to cuts in research funding from the US government, the company now expects "purchases to be more muted in 2025, especially for instruments and equipment," he added.
Additionally, Williamson said, the company is baking "a lower level of clinical trial work related to vaccine studies" into the new guidance. According to Casper, the company has recently seen $200 million of vaccine-related studies canceled or put on hold. About half of these are directly funded by the government, while the remaining are supported by pharmaceutical companies.
Taken together, he said, the impact from the current administration reduces the company's revenue guidance by $500 million at the midpoint.
To mitigate the effects of the macroeconomic environment, Casper said the company has taken "mitigation actions," which include managing the supply chain and managing cost and product pricing.
"We are taking appropriate pricing actions; we are not trying to take advantage of the situation," Williamson said. "Given we are in an inflationary environment, given what is happening in terms of tariffs, that is the approach we are taking."
While the company expects the mitigation efforts to fully offset the impact of the tariffs next year, they will "take time to complete" and the company will not get all the benefits in 2025, Williamson noted.
As for non-China-related tariffs, Williamson said they are increasing costs when the company directly imports items into the US and will also likely increase the cost of many items that the company buys in the US that have an overseas component. However, these costs can be offset by foreign exchange effects as well as by the company's mitigation actions, leading to no anticipated net impact on adjusted EPS guidance as of now.
Williamson said the new guidance was set "using tariff rates that are in place today and assumes no change in the current US policy focus." As such, the company's financial outlook for the year still could change, given the shifting macroeconomic environment.
Despite their negative impact, the tariffs and policy changes are "also creating some very relevant medium- and long-term opportunities" for the company, Williamson said. For instance, Casper said Thermo Fisher is increasing its investment in US manufacturing and R&D in the range of about $2.0 billion over the next four years. These investments will be geared toward adding capacity for pharma services, analytical services, and laboratories, as well as additional R&D.
In a statement on Thursday, Thermo Fisher said the company currently has 64 manufacturing operations in the US across 37 states, making analytical instruments, specialty diagnostics, and life sciences solutions, as well as providing contract development and manufacturing services for pharmaceutical companies. Thermo Fisher currently has 50,000 US employees and invests $1 billion annually in R&D in the US.
"Over the next four years, the company will continue to expand its impact in the US by creating high-paying jobs, adding manufacturing and lab services capacity, and investing in research and development," the firm said.
"We are working to maximize these upsides, including leveraging our extensive US manufacturing capabilities to help our customers navigate their own potential tariff impacts," Williamson said. "This will have minimal impact in 2025, but it is expected to be an important contributor going forward."
Turning to Q1 financial results, for the quarter ended March 29, Thermo Fisher booked $10.36 billion in revenues, up a fraction of a percent from $10.34 billion in the same quarter last year, beating Wall Street's average estimate of $10.23 billion. Organic revenue growth was 1 percent for the quarter, which was offset by unfavorable foreign exchange effects.
By geography, revenues in North America were flat year over year, Williamson said. Revenues in Europe grew in the low-single digits, as did Asia-Pacific revenues, with China revenues declining in the mid-single digits.
Looking at Thermo Fisher's business segments, Q1 revenues in life sciences solutions increased 2 percent to $2.34 billion from last year’s $2.29 billion. Organic revenue growth was also 2 percent for the segment, driven by the bioproduction business.
Analytical instruments revenues went up 2 percent, or 3 percent organically, to $1.72 billion from $1.69 billion in the prior year, led by the electron microscopy business.
Specialty diagnostics revenues grew 4 percent to $1.15 billion compared to $1.11 billion in the year-ago quarter. Organic revenue was also up 4 percent in this segment and was led by the healthcare market channel as well as the immunodiagnostics and transplant diagnostics businesses.
Revenues from the laboratory products and biopharma services segment saw a 1 percent decrease to $5.64 billion from $5.72 billion a year ago. The change was driven by the runoff of pandemic-related revenues, partially offset by growth in the pharma services business and the company's research and safety market channel.
Thermo Fisher's net income for Q1 totaled $1.51 billion, or $3.98 per share, compared to net income of $1.33 billion, or $3.46 per share, in the year-ago quarter. Adjusted EPS was $5.15 for the quarter, slightly above the analyst consensus estimate of $5.10.
The firm's R&D expenses increased 3 percent in Q1 to $342.0 million from $331.0 million in Q1 2024, while SG&A costs remained almost flat at $1.72 billion versus $1.73 billion a year ago.
Thermo Fisher ended the quarter with $4.13 billion in cash and cash equivalents and $1.81 billion in short-term investments.
For Q2, Thermo Fisher expects organic growth to be similar to Q1 and adjusted EPS to be approximately $.05 to $.10 higher than in Q1, Williamson said.
In afternoon trading on the New York Stock Exchange, Thermo Fisher's shares were almost flat at $434.66.