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Here's Why Hold Strategy is Apt for Danaher (DHR) Stock Now

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Danaher Corporation (DHR - Free Report) is backed by multiple tailwinds despite raw material cost inflation, supply chain issues and foreign currency headwinds.

This Zacks Rank #3 (Hold) company is benefiting from strength across its core Life Sciences segment owing to robust activity in the bioprocessing business and growth in instrument businesses, led by SCIEX, Leica Microsystems and Beckman Coulter Life Sciences. In the first nine months of 2022, revenues from the segment jumped 6.5% year over year.

Robust growth in Beckman Coulter Diagnostics and Molecular Diagnostics is driving the Diagnostics segment’s performance. Healthy demand for products related to respiratory testing is also a key catalyst to the segment’s growth. Revenues from the Diagnostics segment rose 13.2% year over year in the first nine months of 2022.

Strength in food, beverage and consumer end markets is fueling the Environmental & Applied Solutions segment’s growth. Solid demand for analytical chemistries and consumables and steady activity levels in municipal and industrial projects are other tailwinds for the segment. Revenues from the segment increased 4.8% year over year in the first nine months of 2022.

Danaher’s bullish guidance for the fourth quarter of 2022 raises optimism in the stock. For the fourth quarter, the company expects revenues to increase in the low-single-digit percent range from the year-ago quarter’s level. Adjusted core revenue growth is anticipated to be in the high-single-digit percent range against the flat to low-single-digit percent decline stated earlier.

DHR management said that the company’s fourth-quarter performance benefited from strong growth in Cepheid's molecular diagnostics business, thanks to respiratory testing revenues of more than $1 billion. The company is scheduled to release fourth-quarter 2022 earnings numbers on Jan 24.

The DBS initiatives, which help Danaher focus more on product innovation, superior product quality, efficient workforce building and shareholder value enhancement, are fostering the company’s growth. The company has been able to reduce the impact of supply-chain constraints and inflationary pressure through its DBS initiatives.

Inorganic activities to boost competency are driving Danaher’s growth. In August 2021, the company acquired Aldevron, strengthening its foothold in the genomic medicine field. The company added Vanrx Pharmasystems and Swift Biosciences to its portfolio in first-quarter 2021. In third-quarter 2022, acquisitions boosted the company’s sales by 1.5%.

Danaher’s measures to reward its shareholders handsomely through dividend payments raise its appeal. In the first nine months of 2022, the company paid out dividends worth $615 million, reflecting an increase of 11.6% on a year-over-year basis. Last February, the company announced a 19% hike in its quarterly dividend payment.

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Here are some better-ranked stocks that you may consider:

MRC Global Inc. (MRC - Free Report) presently carries a Zacks Rank #2 (Buy). The company pulled off a trailing four-quarter earnings surprise of approximately 103%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks.

MRC Global has an estimated earnings growth rate of 325.9% and 37.4% for 2022 and 2023, respectively. Shares of the company have rallied 16% in the past six months.

IDEX Corporation (IEX - Free Report) presently carries a Zacks Rank #2. The company delivered a trailing four-quarter earnings surprise of 5.7%, on average.

IDEX has an estimated earnings growth rate of 28.4% and 6.1% for 2022 and 2023, respectively. Shares of IEX have gained 26.1% in the past six months.

EnerSys (ENS - Free Report) delivered a trailing four-quarter earnings surprise of 27.1%, on average. ENS presently carries a Zacks Rank of 2.

EnerSys has an estimated earnings growth rate of 7.2% and 26.3% for fiscal 2023 and 2024, respectively. The stock increased 33.9% in the past six months.
 


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