Danaher's Not Cheap, But Barclays Says Price Is Worth It For A 'Sleep At Night' Stock

Danaher Corporation DHR reported second-quarter results after the market closed on Monday. EPS of $1.25 beat the Street’s consensus by $0.03, while revenue of $5.79 billion came in $30 million ahead of estimates. Following the announcement, analysts at Barclays shared some thoughts.

First off, they pointed out that in spite of the FTV spin, results were strong, especially when compared to expectations for the overall industry. The company posted consolidated core growth of 2 percent (and standalone core growth of 3 percent), well above its group and other large-cap peers like Honeywell International Inc. HON and General Electric Company GE, which are expected to deliver a decline of at least 1 percent. On the other hand, the FTV spin impacted negatively on margins, which fell 90 basis points.

New disclosures have provided Barclays analysts with a more detailed look at RemainCo performance (Danaher ex-FTV), “and results were solid across the board,” they noted, as all four segments posted positive core growth.

Thus, the experts concluded that Danaher “remains one of the better stories” in their coverage universe. In fact, they expect the company to outperform its low growth peers, mainly on the back of a strong management team, an asset mix that is better than its competitors,’ lower cyclicality and the potential for future M&A activity.

As the FTV spin becomes part of the past and the Pall integration is almost a year in, Barclays sees Danaher returning to M&A markets soon. And, while the analysts acknowledge that valuation isn’t especially cheap, it's a price they are “willing to pay for one of the few ‘sleep at night’ stocks in industrials.”

Barclays maintains an Overweight rating and $90 price target on shares of Danaher.

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Disclosure: Javier Hasse holds no interest in any of the securities or entities mentioned above.