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Here's Why Danaher (DHR) Is a Worthy Investment Pick for 2022

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Danaher Corporation DHR manufactures and provides multiple lines of commercial, professional, consumer, and industrial products. It serves customers in food and beverage, microelectronics, medical, hospitals, and other end markets.

The company’s solid fundamentals and healthy growth opportunities have helped boost its shares by 47.9% in the past year. Also, upward revisions in earnings estimates support DHR’s attractiveness.

The Washington, DC-based company presently carries a Zacks Rank #2 (Buy). The stock belongs to the Zacks Diversified Operations industry. The industry is in the top 40% (with a rank of 101) of more than 250 Zacks industries.

In the past year, the industry has rallied 10% and the S&P 500 has risen 28.6%.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

What’s Making DHR an Attractive Investment Option for 2022?

Danaher delivered better-than-expected results in the first three quarters of 2021. Its earnings beat was 11.68% in the third quarter, with earnings per share of $2.39 surpassing the Zacks Consensus Estimate of $2.14. Then again, the quarter’s bottom line increased 39% year over year, driven by sales growth and margin expansion.

Notably, the Zacks Consensus Estimate for fourth-quarter 2021 earnings is pegged at $2.50, suggesting an increase of 20.2% from the year-ago quarter’s reported figure.

Several factors are favouring the growth prospects of Danaher for the fourth quarter of 2021 (slated to report on Jan 27, 2022) and 2022. Its solid product offerings, focus on innovation and building product quality, and a dedicated workforce are beneficial. Also, the pandemic-induced demand for products has been impressive in the past few quarters.The same is anticipated to increase sales by mid to high-single digits in the fourth quarter and above 10% in 2021.

Danaher anticipates core revenue to increase in low to mid-teens percentage in the fourth quarter of 2021 and expand >20% in 2021. The Life Sciences segment is expected to gain from healthy demand for bioprocessing products, and efforts to improve production capabilities. Then again, the Diagnostics segment is likely to benefit from a rise in demand for testing volumes (non-COVID) and molecular testing. Solid demand for equipment and ahealthy consumable business will favor the Environmental & Applied Solutions segment.

Solid shareholder-friendly policies and benefits from acquired assets also add to Danaher’s attractiveness. In 2021, Danaher added Vanrx Pharmasystems, Swift Biosciences, and Aldevron to its portfolio. Cytiva’s — the operating company formed after Danaher acquired General Electric Company’s GE BioPharma business in March 2020 — contribution to sales is anticipated to be in the low-single digits in the year.

However, supply-chain restrictions, high costs and expenses, high debts, and woes related to international operations are problematic.

The Zacks Consensus Estimate for Danaher’s earnings per share is pegged at $9.85 for 2021 and $10.13 for 2022, suggesting year-over-year growth of 56.1% and 2.8%, respectively. The consensus estimate for both 2021 and 2022 marks a 0.5% increase from the 60-day-ago figures.

Other Stocks to Consider

Two other top-ranked stocks in the industry are discussed below.

ITT Inc. ITT presently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Its earnings surprise in the last reported quarter was 6.45%. The same for the last four quarters was 10.63%, on average.

In the past 60 days, ITT’s earnings estimates have increased 2% for 2022. ITT’s shares have gained 17.4% in the past three months.

LSB Industries, Inc. LXU reported better-than-expected results in the last reported quarter, with earnings surpassing estimates by 125.00%. Its earnings surprise in the last four quarters was 15.86%, on average. The company presently carries a Zacks Rank #2.

LSB Industries’ earnings estimates increased 28.3% for 2022 in the past 60 days. LXU’s shares have gained 22.8% in the past three months.


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