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Danaher (DHR) Exhibits Bright Prospects, Headwinds Persist

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Danaher Corporation (DHR - Free Report) has been benefiting from solid demand for bioprocessing products, therapeutics and products related to molecular testing. Also, strength across the company’s consumables business and solid demand for equipment have been driving its performance. The impact of COVID-related testing is also predicted to boost its sales in the near term. Danaher expects year-over-year core revenue growth in the range of low-single digits for the second quarter of 2022 and mid-single digits for 2022.

The company intends to strengthen and expand its businesses by adding assets. DHR’s acquisition of Aldevron (August 2021) is anticipated to enhance the company's foothold in the genomic medicine field. Also, it added Vanrx Pharmasystems and Swift Biosciences to its portfolio in first-quarter 2021. In first-quarter 2022, acquisitions boosted the company’s sales by 2%.

Danaher remains committed to rewarding shareholders handsomely through dividend payments and share buybacks. In 2021 and the first three months of 2022, the company used $742 million and $191 million for paying out dividends, respectively. Notably, the quarterly dividend rate was hiked by 4 cents per share in February 2022.

However, escalating costs and expenses have been a major concern for the company over time. In first-quarter 2022, its cost of sales increased 14.5% year over year, while selling, general and administrative expenses rose 11.5%. Also, its research and development expenses increased 16.1% in the quarter. Inflationary pressures and woes related to supply-chain restrictions might continue adversely impacting its margins and profitability in the near term.

Its high-debt profile remains a concern too. Exiting first-quarter 2022, its long-term debt was $21.8 billion. In December 2021, the company issued $1 billion worth of senior notes and redeemed notes worth €800 million. Further, a rise in debt levels can raise its financial obligations.

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The Zacks Rank #3 (Hold) stock has lost 23.4% compared with a 22.4% decline of its industry in the past six months.

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