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Danaher (DHR) Exhibits Bright Prospects, Headwinds Remain

On Apr 14, we issued an updated research report on Danaher Corporation DHR.

In the past three months, this Zacks Rank #3 (Hold) stock has gained 0.2% compared with the industry’s growth of 11%.

Existing Business Scenario

Danaher is poised to benefit from healthy demand for bioprocessing products in the quarters ahead. Also, the company anticipates the demand for therapeutics and COVID-related vaccines to boost the performance of its Cytiva and Pall Biotech businesses. In addition, the healthy consumables business and solid demand for equipment will likely be favorable, going forward. It’s worth mentioning that the company anticipates core revenues, including Cytiva, to grow 29% in the first quarter of 2021.

Also, the company believes in strengthening and expanding its businesses through acquisitions. Notably, it acquired Labcyte Corporation in January 2019 and added General Electric Company’s GE BioPharma business to its portfolio in March 2020. The BioPharma buyout complements the company’s biologics workflow solutions of the Life Sciences segment.

It remains committed to rewarding shareholders through dividend payouts, apart from using its fund for acquiring lucrative businesses. In 2020, the company paid out dividends worth $615 million. Also, in February 2020, it announced a hike of one cent per share in the quarterly dividend rate.

However, the company has been experiencing rising costs and expenses over time. Notably, its cost of sales recorded an increase of 29.7% year over year in the fourth quarter and 23.7% in 2020. Moreover, operating expenses (including selling, general and administrative, and research and development expenses) flared up 35% on a year-over-year basis in the fourth quarter of 2020 and 22.8% in 2020.

Further, given its widespread presence in international markets, the company is exposed to unfavorable foreign currency movements. Any adverse movement in foreign currencies in the future might negatively impact its results in the quarters ahead.

Stocks to Consider

A couple of better-ranked stocks are Griffon Corporation GFF and Regal Beloit Corporation RBC, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Griffon delivered a positive earnings surprise of 115.48%, on average, in the trailing four quarters.

Regal Beloit delivered a positive earnings surprise of 31.56%, on average, in the trailing four quarters.

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