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Danaher Corporation (NYSE:DHR) was upgraded to Outperform from Sector Perform by RBC Capital analyst Deane Dray on Wednesday.
Dray also raised the firm’s price target on Danaher to $310 from $299, telling investors that they believe its high quality, defensive portfolio looks incrementally more attractive given the higher Wall of Worry/macro fears (75% recurring revs and +90% mix in life sciences/diagnostics and water).
“This upgrade is also consistent with our sector call to increase defensive exposures. We would also downplay concerns about Danaher’s tough COVID comps. Net leverage of just 1.7x provides ample M&A optionality. Valuation is also attractive, with relative P/E near the low-end of its historical range vs. Multi-Industry peers. Our $310 price target implies 18% upside,” the analyst wrote.
Answering the question of why now, Drau said: “Move up the quality curve with this defensive ‘safe haven’ with 75% recurring revenues and +90% in life sciences/diagnostics and water; low-end relative valuation presents attractive entry point.”
“With the macro Wall of Worry ratcheting higher on inflation fears, supply chain disruptions, chip shortages, China COVID shutdowns, Russia-Ukraine war, rising rates, and a stronger US Dollar, we are tactically increasing our defensive weighting in our sector barbell of recommendations.”
The analyst said potential pushbacks include the company’s China exposure which is at 13% of sales, and the potential to move into a risk-on environment, given that the stock is a defensive play.
