NEW YORK (GenomeWeb) – Investment bank Janney today downgraded Danaher's shares to a Neutral rating from a previous Buy rating, but kept its fair value estimate for the company at $95 per share.
In a research note, analyst Paul Knight said that Danaher "has more work to do on optimizing its portfolio, and we expect smaller organic growth surprises than other peers." In particular, he noted Danaher's 2.5 percent organic growth in the first quarter, which Knight said was the lowest among large cap science peers, such as Thermo Fisher Scientific, Waters, and Agilent Technologies.
He further said that Danaher needs to build and to "prune" its portfolio. While the firm's acquisition of Cepheid late last year adds a "meaningful growth driver" in the diagnostics space, "we see holes" in other parts of the firm's life sciences business. Its analytical instruments business is focused on mass spectrometry, and Knight said, in order to compete with Agilent and Thermo Fisher, Danaher will need to add more instruments.
Meanwhile, its dental business has seen only 1 percent organic growth on average over the last nine quarters, and "[w]e see limited R&D and [sales, general, and administrative expense] synergies with the rest of the portfolio," Knight wrote. He added that a transaction similar to Danaher's spinoff of test, measurement, and industrial firm Fortive in 2016, "would allow Danaher to better focus on being a life science pure-play," and allow "for smaller acquisitions to have a more meaningful impact."
In afternoon trading on the Nasdaq, Danaher shares were down a fraction of 1 percent at $85.57.