Danaher had a disappointing 2024. Its path to success next year goes through Wall Street
Life sciences firm Danaher has certainly not been an easy stock to own this year. A wave of startups going public on Wall Street would go a long ways toward changing that. Year-to-date performance: down 0.1% Forward price-to-earnings multiple: 27.8 versus a five-year average of 28.8 Our rating: Buy-equivalent 1 Our price target: $305 a share DHR YTD mountain Danaher’s year-to-date stock performance. ’24 look back This year was all about a recovery in the bioprocessing market, which had been under pressure due to elevated inventories at large customers and limited funding for smaller biotech startups that buy Danaher equipment and products. Danaher’s other issue was China, where economic growth struggled all year and announced stimulus measures failed to translate into a material pickup in orders. That’s really what made this such a frustrating year to be invested in Danaher. Management executed well and did its best to keep bioprocessing order expectations in check with investors, and then as soon as that business started to turn and the stock got some momentum, investors refocused their attention on the negative economic updates from China. Through it all, we’ve kept Danaher as one of 12 core holdings in the portfolio . Why? Jim Cramer’s investing rule No. 20 : Patience is a virtue and giving up on value is a sin. While Danaher may trade at a premium versus the S & P 500 , we see a lot of value in this stock due to the longer-term attractiveness of its life sciences end market, including bioprocessing, and the quality of its management team, which is always looking for new ways to shed slower-growth businesses and refresh the portfolio with multi-year growth in mind. ’25 look ahead In addition to a continued rebound in bioprocessing, Danaher needs the Chinese economy to pick up steam, which should lead to an increase in orders from customers in the country. Within bioprocessing, large pharmaceutical customers are one part of the business equation. With their inventory levels largely right-sized, new orders should start to accelerate. The other part of the equation is smaller startups that saw their access to funding take a big hit following the collapse of Silicon Valley Bank in March 2023. While lower interest rates can certainly lead to more private market funding, they should also improve the backdrop for initial public offerings. And a better IPO market is really good news for Danaher, as Jim explained during the December Monthly Meeting. “One of the first things biotech companies do when they come public is place large orders with Danaher … That means to me 2025 will be much better than 2024, even if China doesn’t get better,” Jim said. Don’t get us wrong: Growth in China is obviously desirable and our preferred outcome. But we’re also mindful that sluggish performance this year at least serves to make the year-over-year China comparisons easier in 2025. As a result, that may take some focus away from the struggling region as investors asterisk Danaher’s numbers there, understanding that it’s simply out of management’s control but should eventually improve. (Jim Cramer’s Charitable Trust is long DHR. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
A worker uses a machine made by Pall Corp. during a demonstration of the clarification stage of the production of influenza vaccine during a tour at a Sanofi Pasteur vaccine production facility in Swiftwater, Pennsylvania.
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Life sciences firm Danaher has certainly not been an easy stock to own this year. A wave of startups going public on Wall Street would go a long ways toward changing that.
