By Paul R. La Monica
Healthcare stocks have been running scared since the election over concerns about what could happen if Robert F. Kennedy Jr. is confirmed as President Trump's Health and Human Services secretary.
Thermo Fisher Scientific never got the memo.
RFK Jr.'s skeptical comments about vaccines have raised worries about a possible slowdown in drug development in the life-sciences industry. He has been particularly critical of the Food and Drug Administration, raising fears that approval of new medications could take much longer than usual, especially if there are major staff cuts at the agency. The Health Care Select Sector SPDR exchange-traded fund (ticker: XLV) is down 4% since Election Day, compared with a more than 5% gain for the S&P 500 index.
Not Thermo Fisher, a medical instruments and equipment giant that makes things like fluorescent dyes, cell counters, beakers, test tubes, and electron microscopes. Its stock, at $574.59, is up about 3% since early November and nearly 11% in January. The reason: RFK Jr. may disrupt parts of the pharmaceutical industry, but he's unlikely to cause research to completely grind to a halt.
"We're optimistic on medtech," said Shams Afzal, a portfolio manager at Carnegie Investment Counsel, which owns Thermo Fisher stock. "There's stability in biotech funding."
While the specter of RFK Jr. looms large, the need for major healthcare companies to develop new blockbuster drugs is more important. Covid-19 vaccines and treatments are no longer as lucrative as they were in 2021, and many face patent expirations that will see cash cows fade away.
That should benefit Thermo Fisher, which sells just about anything a drugmaker needs for diagnostics, said Shivani Vohra, a portfolio manager at Parnassus Investments who owns the stock in the Parnassus Growth Equity fund (PFGEX). What's more, the company only gets a small percentage of its revenue from National Institutes of Health funding, further minimizing the risk of RFK Jr. upending its business.
"[Thermo Fisher is a] diversified life-sciences tool company that has a flywheel because it's a one-stop shop," Vohra said. "There are clear secular trends around innovation."
The company itself seems unperturbed by the changes in the political landscape. At the J.P. Morgan Healthcare Conference earlier in January, Thermo Fisher CEO Marc Casper said that "there's quite a bit of enthusiasm" among its pharma and biotech customers, despite questions about potential tariffs and new regulations from Health and Human Services. That echoed comments Casper made at the Wolfe Research Healthcare Conference in November, where he said he wasn't particularly worried about tariffs against China hurting the company -- as the country accounts for only about 8% of its revenue, compared with around 15% for many of its competitors.
Investors should find out if such optimism is warranted when Thermo Fisher reports its fourth-quarter results on Jan. 30 and potentially updates its outlook for 2025. Analysts are forecasting earnings to increase by 5% from a year ago, and are predicting momentum to accelerate going forward following post-Covid declines in 2022 and 2023, with growth hitting 7% in this year and 11% in 2026.
At just under 25 times forecast earnings for 2025, the stock is trading roughly in line with its historical averages but at a discount to rivals such as Danaher, Mettler-Toledo International, and Bio-Techne, which all trade at multiples in the high 20s to low-to-mid 30s. Wall Street is fairly bullish as well, with 27 analyst Buys versus only five Holds. The consensus price target of about $650 is some 12% higher than current levels.
Let investors in Pfizer and Moderna worry about Trump 2.0 and RFK Jr. Thermo Fisher stock should have a healthy year.
Write to Paul R. La Monica at paul.lamonica@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
January 23, 2025 01:00 ET (06:00 GMT)
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