SerpApi.Org
To say Danaher Corp. had a downbeat reaction to earnings is an understatement. We regret the timing of our stock pick, though investors with longer time horizons will want to stay the course.
Danaher had its worst day in two decades on Tuesday after the life sciences and diagnostics company’s second-quarter earnings. The quarter itself came in better than expected on both top and bottom lines, and the company also raised full-year guidance above consensus estimates. So far, so good.
The devil was in the details though. Danaher expects core revenue (a metric that excludes things like currency and acquisitions) to increase between 2% and 3% for the third quarter, and Danaher narrowed its full-year forecast to 3% to 4% growth from the prior 3% to 6% expectation. Likewise individual units appeared wobbly. Biotech core growth was below expectations for the quarter, as was guidance, a similar problem for its bioprocessing business.
After Barron’s highlighted the stock at the start of the year, our technical analyst added support in the spring. That obviously hasn’t worked out.
However since we did go ahead, it seems trite to recommend selling after the shares had such a down day. And going back to technicals, it was encouraging that the stock did recover a bit from the worst of the day’s selling. As long as the stock stays above $160, there’s reason to believe it can stage a comeback, as that’s been its support level this year, and it hasn’t broken below that even during its slide in recent years.
The fundamental picture is slightly more mixed from here. Management said that timing at a “few” large commercial customers was the reason for the disappointing bioprocessing outlook, so at some point that could flip from headwind to tailwind. And there were upbeat results from its life sciences division, showing some things are going right.
Of course, the best time to have jettisoned Danaher would have been before the selloff, but now that it’s done, the shares could slowly work their way back from the worst of the pain. Then it will be time to reassess again.
Join us for the next live Q&A: Hear from our stock pickers and technical analyst as we discuss the latest market developments—and take your questions. Register hereShare your questions and thoughts in the “Conversation” section below to engage directly with the author and our communityReceive alerts about more content from this author by clicking “Follow” next to the author byline at top
