Shares of Danaher Corp. (DHR) reached a 52-week high of $77.01 on Wednesday, Dec 18, 2013. However, the stock closed at $74.76, representing a one-year return of about 38.1% and a decent year-to-date return of roughly 34%. Average volume of shares traded over the last three months stands at approximately 2,475,140.
Danaher expects to benefit from multiple acquisitions made during the year. The company continues to invest in research and development (R&D) to drive product development and expansion. In the third quarter, Danaher also launched a couple of new diagnostic equipments, which are likely to contribute to the company’s revenues, going forward. Further, organic growth and margin expansion of the company is facilitated by its DBS system (Danaher Business System).
Danaher delivered positive earnings surprises in the last two of the four quarters with an average beat of 0.74%. This Zacks Rank #3 (Hold) company has a market cap of $53.6 billion and a long-term expected earnings growth rate of 12.2%.
Danaher’s Strengths
The company follows an aggressive acquisition strategy and is on a constant lookout for business that strategically fits its existing business portfolio and also helps expansion and diversification into new and attractive business avenues. The recent acquisitions of companies like Packetloop, Teletrac and CAPE Systems are expected to enhance DHR’s product development chain as well as customer experience. The company’s acquisition of Videojet in 2002 proved to be one of the most important strategic moves by the company. At present, Videojet is the leader of the coding, marking and printing market that is valued at $4 billion and is expected to grow over 4%–6% in the long run.
Danaher is gradually evolving as a healthcare company. It has broadened its presence in the healthcare and dental markets which are expected to grow in the long-term owing to the rise in aging population and increased spending on healthcare and fitness. Aged population is believed to be one of the fastest-growing age groups over the next couple of decades and therefore we believe this will lead to a rising demand for health care products and services in Danaher's Dental and Life Science & Diagnostic businesses. In the latest reported quarter (third quarter of 2013), approximately 36% of revenues were derived from Life Sciences & Diagnostics and Dental segments.
Apart from this, the company has strategically diversified its business geographically and expects to witness robust growth in diverse economies including Japan, China, and Western Europe. More than half of Danaher’s revenues come from outside the U.S with approximately 25% of the revenues generated from China. While the U.S. markets are forecasted to grow at the rate of 2%–4%, emerging markets like India and China have the potential to grow twice as much. In the third quarter of 2013, most of Danaher’s businesses, except the industrial businesses, saw improvements in China.
Improved 3Q13 Earnings
Danaher reported net income of $597.0 million or 84 cents per share in the third quarter of 2013 compared with $548.7 million or 77 cents in the year-ago quarter. The reported earnings marginally beat the Zacks Consensus Estimate by a penny.
The healthy rise in earnings was mainly attributable to core revenue growth and margin expansion. Specific initiatives for new product development and increased investment were also positive drivers for the company. In addition, most of its segments, barring the Environmental and Test & Measurement segment, reported a decent improvement in revenues year over year.
Danaher generated total sales of $4.7 billion in the quarter, up 5.5% year over year. Core revenues for the quarter climbed 3% year over year, while revenues from acquisitions were up 3.0%, partially offset by adverse currency translation effects of 0.5%. The reported revenues exceeded the Zacks Consensus Estimate of $4.6 billion by 2.1%.
Estimate Revisions
Over the last 60 days, 1 of the 17 estimates and 2 of the 13 Estimates for 2014 and 2015, respectively, were revised upward. However, the Zacks Consensus Estimate was stagnant at $3.41 per share for 2014, and declined 1.3% to $3.76 for 2015.
Other Stocks to Consider
Danaher currently has a Zacks Rank #3 (Hold). Investors interested in the Diversified companies sector could consider CLARCOR Inc. (CLC), Hutchison Whampoa Limited (HUWHY) and ITT Corp (ITT). All three carry a Zacks Rank #2 (Buy).
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