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DHR – Market expectations are for Uniform ROA to reach new peaks, but management may be concerned about their projects, margins, and revenue growth

March 2, 2021

  • Danaher Corporation (DHR:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 31.4x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management may be concerned about their vaccine and therapeutic projects, Cytiva and Pall Biotech margin growth, and core revenue growth across segments

  • Specifically, management may lack confidence in their ability to sustain margin performance and shipment growth for Cepheid, expand margins for Cytiva and Pall Biotech, and maintain order growth for Cytiva. Furthermore, management may be exaggerating the extent of their involvement in vaccine and therapeutic projects and the sustainability of increased sales, particularly for COVID-19 related transactions. They may also lack confidence in their ability to expand core revenue growth for ChemTreat, meet capital equipment sales guidance, and improve their marking and coding businesses. Moreover, they may be downplaying concerns about the pace of the recovery of intranational travel in China and their business to pre-COVID levels. Finally, they may lack confidence in their ability to maintain their free cash flow and sustain productivity and operations gains from Danaher Business System (DBS) across all platforms