Danaher Corporation DHR yesterday announced the pricing of $1 billion worth of senior notes. Subject to fulfillment of closing conditions, the offering will likely be closed on Oct 6, 2020.
It is worth mentioning here that the company’s shares have gained 0.6% on Sep 29, ending the trading session at $211.01.
Inside the Headlines
As mentioned, the notes offered are due to expire on Oct 1, 2050, and carry a coupon rate of 2.600%. It has been offered to the public at 98.970% of the principal amount. Interest on notes will be paid semi-annually, each on Apr 1 and Oct 1. The first interest payment will be made on Apr 1, 2021.
Notably, the issuer has the option to redeem the senior notes before Apr 1, 2050, at a redemption price, which is greater than the principal value of the notes and the present value of the pending payments and any accrued and unpaid interests, if applicable. The notes can be redeemed on or after Apr 1, 2050, for a value equal to par value plus accrued and unpaid interest.
Notably, the offering’s rating is Baa1 by Moody’s and BBB+ by S&P.
Danaher anticipates securing net proceeds of $980 million from the note offerings. The proceeds are net of underwriting discounts and issuance-related costs. The proceeds will be used for satisfying general corporate purposes, including funding for working capital and capital expenditure needs, refinancing of indebtedness (outstanding), and other purposes.
We believe that the offering of senior notes will increase the company’s debts, and thereby might inflate its financial obligations and hurt profitability.
Danaher’s Debt Profile
It is worth mentioning here that the company's long-term debt at the end of the second quarter of 2020 stood at $22.4 billion, reflecting a decrease of 1.6% from the previous quarter and an increase of 4.2% from the 2019 level.
Notably, Danaher borrowed $7,691.3 million in the first half of 2020 through instruments with a maturity of more than 90 days. Also, the company repaid $3,750 million of such borrowings during the same time frame. At the end of second-quarter 2020, Danaher’s total debt to total capital stood at 38.1%.
Its ability to fund financial obligations — reflected from its times interest earned — decreased from 25.3X at the end of first-quarter 2020 and 31.4X at the end of the fourth quarter of 2019 to 20.0X at the end of second-quarter 2020. High debts and the inability to repay them might be concerning for Danaher in the quarters ahead.
Zacks Rank, Price Performance and Estimate Trends
With a market capitalization of approximately $148.8 billion, Danaher currently carries a Zacks Rank #2 (Buy). The company is likely to benefit from growth opportunities within Life Sciences and Diagnostics segments, acquired assets, solid product offerings, focus on innovation and shareholder-friendly policies.
In the past three months, the company’s share price has gained 19.1% compared with the industry’s growth of 8.6%.
Also, the Zacks Consensus Estimate for the company’s earnings has been increased 0.9% to $5.47 for 2020 and 0.8% to $6.32 for 2021. Notably, there was one upward revision in estimates for 2020 and 2021 while no downward revision was recorded during the past two months.
Danaher Corporation Price and Consensus
Danaher Corporation price-consensus-chart | Danaher Corporation Quote
Other Stocks to Consider
Three other similar-ranked stocks in the industry are HC2 Holdings, Inc. HCHC, Icahn Enterprises L.P. IEP and Raven Industries, Inc. RAVN. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the past 60 days, the bottom line estimates for these companies have improved for the current year. Further, earnings surprise for the last reported quarter was 166.67% for HC2 Holdings, 402.22% for Icahn and 212.5% for Raven.
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