Stock Idea…Danaher Corp

Stock Idea…Danaher Corp

Symbol : DHR

Exchange: NYSE

Market Cap : 56.4 Billion

Revenue : 17.4 Billion
Three Year Revenue Growth : -2.6 %
Investment Type : Big Cap Value (Dividend Grower)

Price/Earnings : 26.1

Forward P/E : 18.8

Price/Book : 2.3

Price/Sales : 3.3

Price/Cash Flow : 18.9

Yield 0.65 %

Price : 81.20
Investment Stem : Akre Capital Management

Danaher Corp designs, manufactures and markets professional, medical, industrial and commercial products and services. It markets its products under the brand of Beckman Coulter, Aperio, Dexis, Chemtreat and others.

Danaher Corporation (Danaher) designs, manufactures and markets professional, medical, industrial and commercial products and services. The Company operates through four segments: Life Sciences, which offers a range of research tools that scientists use to study the basic building blocks of life, including genes, proteins, metabolites and cells, in order to understand the causes of disease, identify new therapies and test new drugs and vaccines; Diagnostics; which offers analytical instruments, reagents, consumables, software and services; Dental, which provides products that are used to diagnose, treat and prevent disease and ailments of the teeth, gums and supporting bone, and Environmental & Applied Solutions, which consists of various lines of business, including water quality and product identification. As of December 31, 2016, Danaher's research and development, manufacturing, sales, distribution, service and administrative facilities were located in over 60 countries.

Back in July of 2016 Danaher Corp spun off a separate business now named Fortive (NYSE: FTV). The spin-off made Danaher a predominately healthcare-care focused business, instead of a conglomerate with significant interests in industrial markets. The company operates in four segments: Life Sciences, Diagnostics, Dental, and Environmental & Applied Solutions. Life Sciences is the largest contributor to revenue at 32% or $5.36 billion. This segment has been a focus for management over the past 2 years, and revenue has grown 62% in 2016.

The main driver of this growth is from the acquisition of Pall in August of 2015 for $13.6 billion. The Pall acquisition brought an innovative industry leader in air and water filter technology. Management has employed growth through acquisition, but has come at a cost by adding significant leverage of $8.1 billion in debt.

The Life Science segment provides products and services that support pharmaceuticals, aerospace, and semiconductor industries. Under the segment the company operates multiple businesses from leading provider in microscopes and scientific medical instruments, to high-tech filtration, separation, and purification applications. Higher sales volumes and cost restructuring savings grew organic revenue and expanded operating income.

The Diagnostics segment supplies products and services for biomedical testing, point-of-care testing, pathology optimization, and blooding testing. All of these products help serve laboratories and hospitals diagnose and treat diseases. Demand in the U.S. was soft in 2016, but was more than offset by high growth markets like China. Diagnostics revenue increased 4.5% in 2016 on a 2.5% organic increase.

Dental develops and manufactures dental chairs, x-ray machines, laboratory equipment, and dental implants; basically a wide range of products that help treat teeth and gum disease along with helping people with their smile. Operating margins expanded 150 basis points on top of 2.5% organic growth in 2016, offset by .5% currency.

The Environmental & Applied Solutions business provides a wide range of analytical instruments, software and related consumables, disinfection systems, and industrial water treatment solutions. Revenue increase nicely at 3% organic growth, half was offset though by -1.5% foreign currency headwind. The operating profit margin profile of this segment is much different than the other three segments at 23%, 800 basis higher.

The dreaded metrics from Morningstar…

http://quote.morningstar.ca/Quicktakes/stock/keyratios.aspx?t=DHR&region=USA&culture=en-CA&ops=clear

The company’s website…

http://www.danaher.com/

Article from seeking alpha…

https://seekingalpha.com/article/4080723-one-year-later-post-spin-danaher-corporation

Danaher business lines provide a diverse revenue base that doesn't compete in many commoditized markets. With less commoditized products comes less competition, but innovation and meeting customers needs is crucial in keeping their moat.

High switching costs allow Danaher to benefit from supplier power. Supplier power is the leverage the supplier has over its customers mostly on pricing. With Danaher large equipment install base within the Life Science and Diagnostics segments, allows additional sales to funnel through to consumables. Danaher is a specialized supplier because of the innovative products and services the company provides to its customer base.

Danaher isn't an industry leader of any of the markets it operates in, but has strategically acquired many companies over the past two decades that have provided high returns on invested capital. With these acquisitions, the company has benefited from economies of scale through selling, inventory, and distribution efficiencies.

The company is emerging from a transformative period. On July 5, 2016, Danaher split into two companies, the ongoing Danaher and the new Fortive (NYSE: FTV). Fortive is an industrial growth company comprised of Danaher's former Professional Instrumentation and Industrial Technologies businesses. Danaher is now more focused on medical technology. Danaher is a quality big cap dividend grower run by share holder friendly management. A good way to play global growth in the medical technology sector of the world economy.

In lieu of the recent weakness in the market breadth of the NYSE, it might be a good idea to hold off buying the stock until the November/December time period.