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DHR – Market expectations are for Uniform ROA to reach new peaks, but management may be concerned about demand, their investments, and costs

August 13, 2021

  • Danaher Corporation (DHR:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 31.7x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management may be concerned about customer demand, innovation and capacity investments, and labor and logistics costs.
  • Specifically, management may lack confidence in their ability to attain significant revenues management may lack confidence in their ability to drive revenue growth from the Aldevron acquisition, meet growing customer demand through innovation and capacity investments, and maintain the rate of developments in the vaccine and therapeutics space. In addition, they may have concerns about patient volumes and clinical diagnostic activity approaching pre-pandemic levels, the sustainability of growth in biologic and genomic-based medicines, and the impact of bioprocessing supply shortages on inventory. Furthermore, management may lack confidence in their ability to effectively deploy capital towards Cepheid and sustain recent COVID tailwinds in cartridge performance. Finally, they may be concerned about the potential impact of labor and logistics costs on margins and they may be overstating their involvement in projects relating to Alzheimer’s.