Danaher (DHR) Likely To Beat On Q1 Earnings: Stock To Gain?

We expect Danaher Corporation (NYSE:DHR) to beat earnings expectations when it reports first-quarter 2017 results before the opening bell on Apr 20.

The company maintained its winning streak in the last quarter with a positive earnings surprise of 1.9%. Danaher consistently beat earnings in the trailing four quarters, with an average positive surprise of 6.6%.

We expect the company to post an earnings beat in the about-to-be-reported quarter.

Why a Likely Positive Surprise?

Our proven model shows that Danaher is likely to beat earnings because it has the right combination of two key ingredients.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +1.19%. This is very meaningful and a major indicator of a likely earnings surprise.

Zacks Rank: Danaher carries a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) have a significantly higher chance of beating earnings estimates. Sell-rated stocks (4 and 5) should never be considered going into an earnings announcement.

The combination of Danaher’s Zacks Rank #2 and ESP of +1.19% makes us confident of an earnings beat in the upcoming report. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Growth Factors this Past Quarter

Danaher’s key strengths include an efficient management team, impressive customer base and wide geographic presence. The company’s operating culture, Danaher Business Systems (DBS), which provides a set of philosophies, processes and toolsets to drive improvement, has acted as a major growth catalyst.

In fourth-quarter 2016, DBS contributed significantly to Danaher’s year-over-year core revenue growth, excellent adjusted earnings per share rise and free cash flow. We believe DBS will continue to fuel impressive sales, margin and earnings growth for the soon to be reported quarter. In addition, each of the company’s platforms has leading brands, high market share in multi-billion markets and impressive secular growth that are expected to supplement first quarter sales performance.

For instance, positive industry trends like new regulations from the Chinese Food and Drug Administration and strategic product launches in the Life Sciences segment bode well for first-quarter top line growth. Pall launched 35 new products for full-year 2016 and SCIEX rolled out the latest model of the X-Series mass spectrometry platform, X500B.

Last year, the company completed the Fortive Corporation (FTV) spin-off and split itself into two independent, publicly traded companies. Post spin-off, Danaher reorganized its business into four segments, each of which has businesses with a recurring revenue structure and strong exposure in healthcare and environmental business verticals. The strategic spin-off, which has strengthened the company’s consumables base, in the dental, life sciences and water businesses, are expected to boost first-quarter financials.

This apart, Danaher’s strategic acquisition strategy, for expansion in targeted regions, is also expected to act as a major catalyst for the first-quarter results. During full-year 2016, the company acquired eight firms across all five platforms for nearly $5 billion. These accounted for 4.0% of sales growth. Two most notable acquisitions from the last quarter, which include the Cepheid and Phenomenex, are expected to boost Danaher’s Life Sciences and Diagnostics business for the soon to be reported quarter.

Stocks That Warrant a Look

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

NCR Corporation (NYSE:NCR) has an Earnings ESP of +4.35%, and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Panera Bread Company (NASDAQ:PNRA) has an Earnings ESP of +2.21% and a Zacks Rank #2.

KLA-Tencor Corporation (NASDAQ:KLAC) has an Earnings ESP of +2.60% and a Zacks Rank #2.

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