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Can Danaher (DHR) Keep the Earnings Streak Alive?

Zacks Equity Research

Danaher Corp. (DHR) is set to report second-quarter 2014 results on Jul 17 before the opening bell. The company delivered a positive surprise of 1.25% in the last quarter. It also posted positive earnings surprises in all of the last 4 quarters with an average beat of 1.46% Let’s consider some important factors that may affect the upcoming results.

Factors Influencing This Quarter

This leading designer, manufacturer and supplier of professional, medical, industrial and commercial products is able to drive organic growth and margin expansion attributable to its evolving operating culture- Danaher Business System (DBS). This system is a set of tools and processes designed to improve business performance in the critical areas of quality, delivery, cost and innovation. Further, the company is gradually broadening its presence in the healthcare and dental markets due to increase in aging population and higher spending on healthcare and fitness.

In addition, Danaher continues to benefit from the acquisition of Beckman Coulter, given its successful product innovations and go-to-market initiatives. The company has recently launched the innovative platform- Varis for enhancing the molecular diagnosis industry. The platform was initiated by Beckman Coulter prior to its acquisition. This novel product has already been launched in Europe and is likely to soon make its way into the U.S. markets after receiving the necessary FDA clearance.

Apart from Beckman Coulter, Danaher’s Leica Biosystems and Radiometer businesses has also been performing impressively in the recent times. Recently, the company has also been making persistent efforts to improve its product portfolio in the AB SCIEX businesses.

Earnings Whispers?

Our proven model does not conclusively show that Danaher is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zero Zacks ESP: That is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 94 cents. Hence, the difference is 0.00%.

Zacks #3 Rank (Hold): Danaher has a Zacks Rank #3  but we need to have a positive ESP to be confident about an earnings surprise.We caution against stocks with Zacks Rank #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:  

Arch Capital Group Ltd. (ACGL), with Earnings ESP of +6.32% and a Zacks Rank #1 (Strong Buy).

W.R. Berkley Corporation (WRB), with Earnings ESP of +2.41% and a Zacks Rank #1.

Infosys Ltd. (INFY), with Earnings ESP of +2.53% and a Zacks Rank #2 (Buy).

Read the Full Research Report on DHR
Read the Full Research Report on WRB
Read the Full Research Report on INFY
Read the Full Research Report on ACGL

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