Danaher Corporation (DHR) is a Washington, D.C, -based multinational science and technology pioneer that develops, manufactures, and markets professional, medical, industrial, and commercial products and services worldwide. Its world-class brands hold leading positions in the demanding healthcare, environmental, and applied end markets.

The company's shares have gained 37.8% in price over the past year and 38.9% year-to-date to close yesterday’s trading session at $308.48. Its strong top-line growth, driven by improvements across all its business segments, and strategic acquisitions have driven its shares up this year.

We think DHR is well-positioned to continue gaining in the near term, relying on its solid fundamentals. Furthermore, its continuing efforts to expand its global reach and build a robust supply chain are expected to propel its performance in the coming months.

Click here to checkout our Healthcare Sector Report for 2021

Here’s what we think could shape DHR’s performance in the near term:

Positive Developments                                                                      

In July, Cytiva and Pall Corporation, part of DHR, announced the expansion of production capacity and services across regions for global life sciences customers as part of an ongoing strategic expansion plan. This will expand the production of essential items needed in biologic medicines and allow the company to fulfill its customers' and patients' current and future needs.

Acquisition Can Expand Footprint

In June, DHR agreed to acquire privately-held Aldevron for an approximately $9.6 billion cash purchase price. The acquisition should broaden DHR’s capabilities in the crucial field of genetic medicine and help the company serve its clients and its critical mission of bringing more life-saving medicines and vaccines to market faster.

Robust Financials and Profitability

For the second quarter, ended July 2, 2021, DHR's sales rose 36.3% from their year-ago value to $7.22 billion. Its operating profit increased 137.6% year-over-year to $2.01 billion, while its net income grew 95.5% from the prior-year quarter to $1.74. Its EPS surged 93.6% year-over-year to $2.40 over this period.

DHR’s 26.2% trailing-12-months EBIT margin is significantly higher than the 2.2% industry average. Also, the company’s 60.3% trailing-12-months gross profit margin is 9.9% higher than the 54.9% industry average. Furthermore, its $7.94 billion in cash from operations compares with a negative $15.44 million industry average.

Impressive Growth Prospects

A $7.64 billion consensus revenue estimate for the next quarter (ending December 2021) indicates a 13% improvement year-over-year. Analysts expect DHR’s EPS to rise 14.9% from the same period last year to $2.39 in the next quarter.

The Street expects DHR’s revenues and EPS to rise 28.9% and 50.9%, respectively, year-over-year to $11.73 billion and $9.52 in its fiscal year 2021. Also, the company’s revenue is expected to rise 5.9% year-over-year to $30.41 billion in fiscal 2022, while its EPS is expected to increase 3.6% from the same period last year to $9.86 next year. In addition, DHR’s EPS is expected to rise at a 17.4% CAGR over the next five years. Also, the company has an impressive earnings surprise history; it topped Street EPS estimates in each of the trailing four quarters.

Consensus Price Target and Rating Indicate Upside

Of the 11 Wall Street analysts that have provided ratings for the stock, 10 rated it Buy, and one rated it a Hold. The $333.82 average analyst price target represents a potential 8.2% upside. The price targets range from a low of $305 to a high of $370.

POWR Ratings Reflect Solid Prospects

DHR has an overall B grade, equating to a Buy rating in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. DHR has a B grade for Sentiment, Growth, and Stability. Analysts’ expectation about its EPS and revenue growth justify the Growth and Sentiment grade. In addition, the stock’s 0.72 beta is consistent with its Stability grade.

Of the 181 stocks in the C-rated Medical – Devices and Equipment industry, DHR is ranked #42.

Beyond what is stated above, we have graded DHR for Value, Quality, and Momentum. Get all DHR ratings here.

Bottom Line

With a $220.22 billion market cap, DHR is among the largest companies in the U.S. healthcare space. It's continued efforts to improve and evolve its manufacturing capabilities should boost the company's performance and strengthen its position in the industry. Thus, the stock should be a valuable addition to one’s portfolio now.

How Does Danaher Corporation Stack Up Against its Peers?

DHR has an overall B grade in our proprietary rating system. This rating is superior to its peers in the Medical – Devices and Equipment industry, such as IntriCon Corporation (IIN), Venus Concept Inc. (VERO), and STAAR Surgical Company (STAA), which have C (Neutral) ratings.

Click here to checkout our Healthcare Sector Report for 2021

DHR shares rose $1.67 (+0.54%) in premarket trading Wednesday. Year-to-date, DHR has gained 39.96%, versus a 21.73% rise in the benchmark S&P 500 index during the same period.

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.

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