Tuesday, July 23, 2019

Strong Acyclical Growth Burnishing Danaher's Growth Star Status

As short-cycle industrial end-markets weaken further, Danaher’s (DHR) exposure to acyclical growth markets like life sciences and diagnostics looks better and better. A decent top-line beat and acceleration in those two segments certainly helps bolster the argument for Danaher as a company and a stock that has much less to worry about as the global economy slows, and margin growth across most of the business certainly doesn’t hurt either.

This is the broken record part of the show, but valuation remains the prime issue with Danaher. I have no doubt that I’ll hear again from the “you buy this and hold forever” crowd, but there are a number of stocks where that argument has been made before and investors ended up seeing big losses as circumstances changed. Danaher looks priced for a mid-single-digit annualized return on par with Honeywell (HON) or Dover (DOV), and with what I see as a high likelihood that industrial/mulit-industrial earnings estimates and multiples will be heading lower in the second half, Danaher’s valuation could continue to remain elevated as the company is poised to offer a lot more core growth than many of its peers.

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Strong Acyclical Growth Burnishing Danaher's Growth Star Status

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