Al Root
Danaher stock gained after picking up a bullish call from Wall Street.
Valuation normalization is the reason, and after a painful few months, the stock looks attractive again.
Shares of the life-sciences company rose 3.3% on Friday to close at $210.74, while the S&P 500 and Dow Jones Industrial Average added 2.1% and 1.7%, respectively.
An upgrade from Stifel analyst Daniel Arias helped boost shares. On Friday, he upgraded Danaher stock to Buy from Hold, and established a $260 price target.
"Following the rerating, Danaher shares seem to have found their footing, with downward [earnings] estimate revisions seemingly done and the stock having shed the above-average premium," wrote Arias.
The rerating was painful. Danaher shares dropped 10% after the company reported fourth-quarter numbers in January, missing Wall Street earnings estimates and indicating sales would be down year over year in the first quarter of 2025. Investors expected growth.
Coming into Friday trading, Danaher stock was down almost 20% since earnings. Shares now trade for about 27 times estimated 2025 earnings, down from 37 times in mid-January.
The market trades for closer to 20 times estimated 2025 earnings, but Danaher has traditionally traded at a premium based on above average earnings growth. Between 2014 and 2024, earnings per share grew about 8% annually, even as Danaher spun off three large businesses: Fortive, Veralto, and Envista.
"The valuation relationship [to the market] has normalized," added Arias. "At current levels, Danaher thus looks much more approachable."
Overall, 79% of analysts covering the stock have Buy ratings, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for Danaher stock is about $266.
Write to Al Root at allen.root@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 14, 2025 16:20 ET (20:20 GMT)
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