Danaher Is A Defensive Play In An Unpredictable Market!

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by Ian Harvey
April 27, 2020

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Danaher pivots towards healthcare and other defensive industries; and is still set to continue growing revenue and earnings over the long-term despite the downturn; and provides a safer investment option.

 And Members of Stock Options Made Easy “Armchair Traders” made potential profit of 193%, using a CALL OPTION.

  Where to now?

Danaher Corporation (NYSE: DHR)

DHR is one of the strongest companies you’ll run across and is seen as a defensive stock by investors. For 50 years, it’s been run by the Rales brothers. Their specialty is finding and buying overlooked niche companies with strong cash flow.

It’s a simple formula, and it’s been incredibly successful for them and their shareholders. Over the last 30 years, Danaher has crushed the rest of the market.

The secret to the company’s success has been its ability to acquire companies in “dull” industries, then applying its “Danaher Business System” to maximize efficiency and profits.

Even so, the COVID-19 pandemic is negatively affecting businesses at the moment, and Danaher came out recently and withdrew its full-year guidance.

The coronavirus pandemic has been playing havoc on most world economies, with stock markets hitting an all-time low, thereby affecting shareholders’ wealth.

Danaher Corporation designs, manufactures, and markets professional, medical, industrial, and commercial products and services worldwide. It reports out of three business segments: life sciences, diagnostics, and environmental and applied solutions.

The company's Life Sciences segment provides mass spectrometers; cellular analysis, lab automation, and centrifugation instruments; microscopes; and genomics consumables.

Danaher's diagnostics businesses make instruments and consumables used by healthcare bodies (such as hospitals and laboratories) to diagnose diseases.

Finally, the environmental and applied solutions segment is a collection of water quality treatment and product identification businesses.

All three segments are seen as being relatively recession resistant, and you could make the case that there will be no shortage of funding for research and development on diseases, and diagnostics testing in a post-COVID-19 world.

DHR stock jumped $4.42 (+2.75%) on Friday to close trading at $165.07.

The Pandemic Effect on Danaher…..

In response to the serious situation, several industrial conglomerates have also committed to support the government in fighting the pandemic by expanding their production line, providing healthcare products and services to customers on an emergency basis and taking precautionary measures for their employees.

And one of these is Danaher Corp. which has been taking pro-active measures to mitigate this coronavirus menace.

Danaher Corporation’s business subsidiary, Cepheid, acquired in 2016, received the Emergency Use Authorization from the U.S. Food & Drug Administration for Xpert Xpress SARS-CoV-2.

 “During this time of increased demand for hospital services, Clinicians urgently need an on-demand diagnostic test for real-time management of patients being evaluated for admission to health-care facilities. An accurate test delivered close to the patient can be transformative — and help alleviate the pressure that the emergence of the 2019-nCoV outbreak has put on healthcare facilities that need to properly allocate their respiratory isolation resources," said Dr. David Persing, MD, Ph.D., Chief Medical and Technology Officer at Cepheid.

Cepheid is a molecular diagnostics company and a subsidiary within Danaher  Diagnostics platform. The company develops, manufactures and markets easy-to-use molecular systems and tests.

And Cepheid has a special quality – they have developed a 45-minute test for Covid-19.

Factors Effecting Danaher .....

The company is unlikely to hit its previous full-year guidance -- not least because the first quarter has already missed expectations, and Danaher is already into its second quarter with the COVID-19 pandemic still significantly affecting the economy.

However, the nature of the slowdown is more of a case of a sudden cessation of activity, rather than an underlying downward trend as Danaher's core revenue growth has been in the mid-single-digit range for a couple of years.

There will likely be extra emphasis on researching and diagnosing diseases after COVID-19.

About 70% of Danaher's revenue comes from recurring sources (consumables), so it has solid base revenue to support it in any downturn.

And once the pandemic has eased, Danaher will experience a bounce-back in sales as healthcare bodies patients undergo procedures again and realign their spending priorities.

YOU NEED TO BE IN TO PROFIT!

Analysts Thoughts About Danaher Stock.....

  • Zacks Investment Research upgraded Danaher from a “sell” rating to a “hold” rating and set a $160.00 target price on the stock in a research report on Wednesday, April 15th.
  • Citigroup raised their target price on shares of Danaher from $160.00 to $180.00 and gave the stock a “buy” rating in a research note on Monday last week.
  • Wells Fargo & Co upped their price target on shares of Danaher from $155.00 to $170.00 and gave the stock an “overweight” rating in a research report on Tuesday last week.
  • Cowen restated a “buy” rating and set a $170.00 price objective on shares of Danaher in a research report on Monday, February 3rd.
  • Finally, UBS Group increased their price target on Danaher from $165.00 to $176.00 and gave the stock a “neutral” rating in a research note on Friday, January 10th.

Seven investment analysts have rated the stock with a hold rating and eight have issued a buy rating to the company.

Danaher presently has an average rating of “Buy” and an average price target of $165.75.

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So…..

Despite the company’s many strengths, Danaher shares have yet to get back to their original price. And with the recent developments the company has become a collection of high-quality, defensive businesses. Going into an economic downturn, this is the type of stock to own and in our case a call option.

Are You Ready To Get On-board With A Danaher Options Trade?

Will Danaher Stock Continue To Rise?

What Other Trades Are We Anticipating?

Do You Wish To Be Part Of This Action?

Join us here at Stock Options Made Easy, and find out our trades moving forward.


AS ALWAYS THE DECISION IS YOURS!


An Important Note: That any suggestions for options trade considerations require investors/traders to use their own discretion as to when to enter or exit! As well, it is advisable to do further research and due diligence before executing your trade.

It is sometimes best to exit a trade, if there is already sufficient profit accrued, before an earnings report is presented. GREED can be the undoing of a nice profit!


Best of Trading,
Ian Harvey
Director of Stock Options Made Easy


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