Danaher (DHR) Benefits From Business Strength Amid Risks
Danaher Corporation DHR has been benefiting from strength in its clinical diagnostics business, driven by growth in Leica Biosystems and Beckman Colter Diagnostics units. The company has been witnessing positive responses for its new products like Aperio GT 450 DX and Access NT ProBNP, both of which recently received the FDA 510K clearance. Also, solid momentum in the molecular diagnostics business, led by increased respiratory and non-respiratory disease tests, bodes well for the company.
Management remains focused on acquiring businesses to gain access to new customers, regions and product lines. In December 2023, Danaher acquired Abcam plc, a global supplier of protein consumables, for $5.7 billion.
Abcam's long track record of innovation, outstanding product quality and breadth of antibody portfolio are expected to help Danaher solve some pertaining healthcare challenges. This buyout expanded DHR’s Life Sciences segment. Acquisitions boosted its total revenues by 2% in the second quarter.
DHR remains focused on rewarding shareholders through dividend payouts and share repurchases. For instance, in 2023, it paid dividends of $821 million, reflecting an increase of 0.4% year over year. Also, it paid out dividends worth $377 million in the first six months of 2024. In February 2024, Danaher hiked its dividend by 12.5% to 27 cents per share.
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In the past six months, this Zacks Rank #3 (Hold) company has gained 7.7% compared with the industry’s 1.7% growth.
However, weakness in Danaher’s Instrument businesses, due to lower demand in the global pharma and biotech markets, has been weighing on the Life Sciences segment. The company has been witnessing a sales decline in mass spectrometry, flow cytometry & lab automation solutions and microscopy businesses due to soft demand for equipment in major end-markets.
High debt levels, which raise financial obligations and are likely to drain profitability, have been a concern for the company. Danaher exited the second quarter with a long-term debt of $16.3 billion. Its current liabilities were $6.7 billion, higher than the cash equivalents of $2.4 billion.
Stocks to Consider
We have highlighted three better-ranked stocks, namely Federal Signal Corporation FSS, PDD Holdings Inc. PDD and 3M Company MMM. While Federal Signal sports a Zacks Rank #1 (Strong Buy), PDD Holdings and 3M currently carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
Federal Signal delivered a trailing four-quarter average earnings surprise of 12.3%. In the past 60 days, the Zacks Consensus Estimate for FSS’ 2024 earnings has increased 5.2%.
PDD Holdings delivered a trailing four-quarter average earnings surprise of 45.6%. In the past 60 days, the consensus estimate for PDD’s 2024 earnings has increased 1.5%.
3M delivered a trailing four-quarter average earnings surprise of 12.6%. In the past 60 days, the Zacks Consensus Estimate for MMM’s 2024 earnings has increased 1.6%.
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