Danaher Corporation (DHR - Free Report) is scheduled to report third-quarter 2017 results before the opening bell on Oct 19. In the quarter to be reported, the company is expected to report strong revenues in Life Sciences & Diagnostics business, which constitutes more than half of its total revenues.
Last quarter, the company’s adjusted earnings beat the Zacks Consensus Estimate of 97 cents by 2.1%. The company has an excellent earnings surprise history, with an average positive surprise of 2.50% in the trailing four quarters.
Let’s see how things are shaping up for this announcement.
What’s Driving Better-Than-Expected Earnings?
Danaher has successfully repositioned itself as a healthcare company, broadening its presence in the healthcare and dental markets, which are anticipated to benefit from the rise in the aging population as well as increased spending on healthcare and fitness.
Additionally, lucrative prospects in pharma and clinical end-markets bode well for the company in the upcoming quarters. Further, Danaher believes that it is well-positioned in the biopharma business, which will prove conducive to operating profit and bottom-line growth for the third quarter.
Moreover, the company’s aggressive acquisition strategy is proving to be a strong profit churner, and is expected to boost top-line growth in the quarter under review. The company also expects core growth rate to accelerate going forward, in light of improving order trends and recent acquisitions like Cepheid and Phenomenex.
Phenomenex has meaningfully enhanced Life Sciences portfolio, and is anticipated to help the company achieve a double-digit return on investment in less than five years. The Zacks Consensus Estimate for revenues from the Life Sciences & Diagnostics business in the to-be-reported quarter currently remains high at $1,403 million compared with second-quarter reported revenues of $1,384 million.
Furthermore, the company’s constant focus on introduction of products to penetrate new markets has enabled it to gain competitive edge over peers. Further, Danaher remains optimistic about core revenue and earnings growth, on the back of improving order trends and its operating culture, Danaher Business System (“DBS”). Historically, DBS has contributed to meaningful core revenue growth, adjusted earnings per share improvement and cash flow generation.
Other Major Factors
Our proven model shows that Danaher has the right combination of the two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is perfectly the case here as you will see below:
Zacks ESP: Danaher has an Earnings ESP of +0.36%, as the Most Accurate estimate of 96 cents is pegged higher than the Zacks Consensus Estimate of 95 cents.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company carries a Zacks Rank #2, which when combined with a positive ESP, makes us reasonably confident of an earnings beat.
Conversely, we caution against stocks with a Zacks Ranks #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.
Other Stocks to Consider
Here are some other companies that you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this quarter:
Applied Materials, Inc. (AMAT - Free Report) has an Earnings ESP of +0.19% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Itron, Inc. (ITRI - Free Report) has an Earnings ESP of +2.99% and a Zacks Rank #2.
KEMET Corp. (KEM - Free Report) has an Earnings ESP of +7.46% and a Zacks Rank #1.
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