Danaher Corporation DHR can be a good investment option for investors seeking exposure in multiple sectors. Its strong fundamentals and growth prospects are compelling, while upwardly revised earnings estimates too reflect bullish sentiments for the stock.
The company is based in Washington, DC, and has a market capitalization of $147.3 billion. It belongs to the Zacks Diversified Operations industry, currently at the top 46% (with the rank of 116) of more than 250 Zacks industries.
The company presently has a Zacks Rank #2 (Buy).
In the past three months, its shares gained 27% as compared with the industry’s growth of 11.4% and S&P 500 rise of 14.8%.
Below we discussed why it is prudent to invest in Danaher now.
Top-Line Tailwinds: Danaher operates under three segmental heads — Life Sciences, Diagnostics, and Environmental & Applied Solutions. In the third quarter of 2020, the company anticipates Life Sciences’ core sales to increase in low-double digits, while the same for Diagnostics are predicted to grow in high-single digits.
The Life Sciences segment is likely to benefit from healthy demand in Cytiva and Pall Biotech businesses. Further, the demand for molecular diagnostics and acute care diagnostics related products are likely to be strong for the Diagnostics segment. It is worth noting here that product development remains a priority for both segments.
Danaher anticipates third-quarter core sales to increase in low- to mid-single digits or in mid- to high-single digits, including the contribution from Cytiva.
Inorganic Activities: The company believes in enhancing product lines, expanding market share and boosting growth opportunities through acquisitions. Also, it believes in divesting assets that are non-core to its business. It is worth mentioning here that acquisitions/divestments boosted Danaher’s sales growth by 4% in second-quarter 2020.
In March 2020, the company acquired the BioPharma business of General Electric Company GE. The acquired business is known as Cytiva and included under Danaher’s Life Sciences segment. Danaher expects Cytiva to contribute 300-400 basis points to core sales in the third quarter of 2020.
In addition, Danaher divested some of its Life Science’s assets to Sartorius AG in April 2020.
Rewards to Shareholders: The company is committed toward rewarding shareholders handsomely through dividend payments. Notably, it distributed dividends totaling $283.1 million in the first half of 2020, reflecting an increase of 21% from the year-ago period.
It is worth mentioning here that the company announced a hike of one cent per share in its quarterly dividend rate in February 2020. We believe that a healthy cash flow position will help the company in rewarding shareholders, going forward.
Earnings Estimate Trend: Its earnings estimates have been revised upward in the past 60 days. Currently, the Zacks Consensus Estimate for its earnings is pegged at $5.47 for 2020, reflecting growth of 12.1% from the 60-day-ago figure. The same for 2021 has increased 10.3% to $6.32 during the same period.
Danaher Corporation Price and Consensus
Danaher Corporation price-consensus-chart | Danaher Corporation Quote
It is worth noting here that eight upward revisions have been recorded for both 2020 and 2021 in the past 60 days. There has been no downward revision in earnings estimates in the past two months.
Also, the consensus estimate for the third quarter of 2020 is pegged at $1.36, reflecting growth from $1.27 in the past 60 days. On a year-over-year basis, estimates for the quarter suggest a rise of 17.2% from the year-ago reported figure.
Other Key Picks
Two other top-ranked stocks in the industry are Griffon Corporation GFF and HC2 Holdings, Inc. HCHC. While Griffon currently sports a Zacks Rank #1 (Strong Buy), HC2 Holdings carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings surprise for the last four reported quarters, on average, was 117% for Griffon and 41.91% for HC2 Holdings.
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