Temporary headwinds have obscured the long-term strength of this global life sciences giant
Thermo Fisher Scientific (NYSE: TMO) has been a cornerstone of the life sciences economy for over a century, and a compounding machine for investors. Since the merger between Thermo Electron and Fisher Scientific in 2006, the company’s stock has delivered a compound annual growth rate of 14.1%, turning long-term shareholders into outsized winners.
However, over the past year its shares are down nearly 30%. Our view is that the drawdown looks less like a permanent impairment of capital and more like a rare window of opportunity for long-term investors.
We believe this sell-off reflects three short-term pressures: i) global macroeconomic uncertainty, ii) trade policy volatility, and iii) the long-anticipated COVID-19 revenue runoff. But none of these factors diminish the structural drivers that have made Thermo Fisher one of the most consistent compounders in U.S. public markets.
Three Headwinds, All Transitory
1. Global macroeconomic uncertainty
Regional sales in China declined mid-single digits last quarter, reflecting macroeconomic softness. But Thermo Fisher’s global footprint and diversified end-market exposure allow it to absorb regional volatility without compromising the broader business operations.
2. Trade policy volatility
Tariffs imposed by China are projected to create a $400 million headwind in 2025, while U.S. policy changes targeting academic and clinical funding could shave off another $500 million. Thermo Fisher has already launched mitigation strategies, including supply chain realignment and commercial pivots. Management expects these impacts to “reduce fairly rapidly” beyond 2025.
3. COVID-19 revenue runoff
After surging during the pandemic, vaccine- and therapy-related revenue is normalizing. In Q1 2025, this was a 2% headwind in the Pharma and Biotech segment, with a residual 1% drag forecast for the full year. Our research points to a core growth that remains robust beneath this runoff, underscoring the strength of the company’s non-COVID franchises.
The Long-Term Model: Built to Compound
None of these short-term pressures change the fact that Thermo Fisher is one of the most resilient and strategically disciplined companies in the healthcare ecosystem.
A proven acquirer: since the 2006 merger of Thermo Electron and Fisher Scientific, the company has executed a textbook M&A playbook. Their bigger moves include acquiring Life Technologies (2014), PPD (2021), The Binding Site (2023), and Olink (2024), among others. These deals have expanded Thermo Fisher’s capabilities in diagnostics, contract research, and proteomics, each of which are high-growth, high-margin verticals.
Organic strength: beyond M&A, Thermo Fisher has nurtured organic growth through category leadership in lab instruments, consumables, bioproduction, and analytical services. Its broad base of customers ranging from pharma giants to universities to government labs, creates durability across economic cycles.
Non-discretionary demand: scientific discovery and medical research don’t pause for recessions. That reality has allowed Thermo Fisher to weather downturns far better than most industrial or tech peers. Its core products and services are essential infrastructure for global health innovation.
A Mispriced Compounder?
At current levels, Thermo Fisher trades at a meaningful discount to its historical valuation multiples, despite maintaining strong cash flow generation, high returns on capital, and defending its dominant market position. As mitigation plans take effect and macro clarity returns, the market may begin to re-rate the stock more in line with its long-term trajectory.
This is a story we have seen play out before, and it is a pattern which we think will rhyme, if not repeat. Thermo Fisher has faced many macro disruptions over its lifetime, and it has emerged stronger from each stress test. That is what has led it to deliver >14% annualized stock returns through multiple business cycles.
The Bottom Line
Thermo Fisher’s recent underperformance reflects temporary noise but not a structural unraveling. For long-term investors seeking compounders with pricing power, essential demand, and strategic depth, the recent drawdown presents an attractive entry point.
The business model remains intact. The growth strategy is active. And the history is clear: this is a company that compounds through volatility, not in spite of it, but because of it.
Visit our website to learn more about the Cordis Global Medical Technology Fund and our investment strategy.
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