Struggling life-sciences firm Danaher (DHR) has been one of the best-performing Club stocks in recent weeks, boosted by signs of a recovery at its bioprocessing business. And with the company set to close a key acquisition this week, Danaher’s stock is set up for a stronger 2024. Danaher’s recent stock-price recovery was helped last week after CEO Rainer Blair said the company was “very confident” that 2023 would mark a bottom in its bioprocessing division, which has contracted in recent quarters due to an inventory glut. Some of Danaher’s pharmaceutical customers — many of whom had been working through an excess of products used in drug development — were “suddenly” needing to place orders, Blair said. Meanwhile, Danaher should become even more attractive to investors on Wednesday, when its all-cash $5.7 billion acquisition of British antibody maker Abcam (ABCM) is expected to close. Announced in late August , the Abcam takeover aligns with Danaher’s proven approach to making investors money: Buying faster-growing, higher-margin companies and further improving their performance. “Danaher has been adamant that 2023 will be the bottom of its bioprocessing business, and we are encouraged by the recent green shoots management has seen from customers,” Jeff Marks, the Investing Club’s director of portfolio analysis, said Tuesday. “Twenty-twenty-four should be a much better year for Danaher, and the Abcam deal should be additive to growth,” he argued. Shares of Danaher entered Tuesday’s session up nearly 16% since the start of November, outpacing the S & P 500 ‘s 9% advance during the same stretch. Despite its recent gains, Danaher remains one of the worst-performing Club stocks in 2023, down more than 5% through Monday’s close in a strong year for the broader market. On Tuesday, Danaher stock fell about 1.75%, to $218.25 per share. DHR .SPX YTD mountain Danaher’s year-to-date stock performance compared with the S & P 500. Danaher’s disappointing performance this year followed a few strong years during the Covid-19 pandemic, as its customers in the pharmaceuticals and biotechnology industries over-ordered its products and tools needed to research and produce drugs, including Covid vaccines and treatments. That inventory build-up meant Danaher saw fewer orders this year, particularly with the worst of the Covid pandemic in the rearview mirror. At the same time, rising interest rates have made it tougher for biotech startups — key Danaher customers — to secure funding for large projects. The company cut its revenue outlook on multiple occasions this year, including in late October . But we added to our position that day , believing the forecast cuts would soon be a thing of the past. The good news is both of these pressures are finally starting to ease. To be sure, at last week’s Evercore ISI health conference, Danaher’s chief executive cautioned that the inventory overhang hasn’t been completely eliminated. “I wouldn’t say that all the slack has been pulled out of the system, but we do think that we’re making pretty significant progress here,” Blair said. The Abcam acquisition is the latest chapter of Danaher’s transition into a company focused on health care — ranging from biologic research and drug development to a testing division that serves hospitals, doctors’ offices and large laboratories. With a product portfolio that includes antibodies and reagents, Abcam should bolster Danaher’s ability to serve academic researchers and companies working to discover new therapies. Plus, Danaher is likely to revamp Abcam’s operations to further enhance its growth profile and profitability over time — critical pillars to its overall corporate strategy . As part of this health-care transformation, Danaher has shed a number of other businesses, including its industrial technology division in 2016 and, in late September, its water-and-packaging unit into a separate company called Veralto (VLTO). Our Danaher ownership gave us a small stake in Veralto, which we’ve since sold . In general, we’ve supported Danaher’s multiyear decision to prioritize health care, even if 2023 has been choppy for shareholders. And the road ahead in 2024 seems to be leveling out. (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.
Struggling life-sciences firm Danaher (DHR) has been one of the best-performing Club stocks in recent weeks, boosted by signs of a recovery at its bioprocessing business. And with the company set to close a key acquisition this week, Danaher’s stock is set up for a stronger 2024.
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