Danaher (DHR) PT Raised to $226 at Baird, 'see potential upside in Biotechnology and Diagnostic'

Baird analyst Catherine Schulte raised the price target on Danaher (NYSE: DHR) to $226.00 (from $225.00) while maintaining a Outperform rating.

The analyst comments "We continue to like DHR here given the company’s production-oriented pharma/biotech mix and relatively low academic/government exposure. We remain cautious on the Life Sciences side of the business given its R&D/academic exposure, but also see potential upside in Biotechnology and Diagnostics, and note the ~$100M cost-action "cushion" in guidance gives some EPS protection flexibility amid ongoing policy/tariff uncertainties. Biotechnology: After 1Q Biotechnology core growth hit the high end of guidance, DHR raised its 2025 bioprocessing outlook to +high-single-digits behind strong consumables performance, especially from large pharma/CDMOs. Broader order commentary was constructive (1Q book-to-bill “solidly” over ~1.0x), and management has also spoken to improving equipment orders. Management noted at a May investor conference that ~30% of overall DHR revenue is exposed to biologic drug manufacturing, while the remaining ~5% of pharma/biotech exposure relates to R&D (mostly in Life Sciences segment); we believe the production side should be more resilient to MFN/drug tariff impacts. - Life Sciences: While DHR’s 2025 guidance already incorporates further U.S. academic/government headwinds (~100bp-200bp headwind to 2025 Life Sciences growth), we remain cautious on academic here given 2Q NIH outlays/ awards trends. That said, we note DHR’s relatively low exposure vs. peers. We are now modeling slightly below DHR's 2025 guidance for this segment, given the implied 2H ramp in what we view as an already challenging market. - Diagnostics: Following significant 1Q respiratory upside, we see less upside opportunity into 2Q given ~typical respiratory/flu dynamics. We await updates on China Diagnostics, in particular, given the expected 2025 VBP impact (already incorporated in guidance) and potential updates/adjustments on China tariff assumptions, given the majority of that exposure came from the Diagnostics portfolio. Current tariff thoughts: As of 1Q25 EPS, management sized tariffs as a ~$350M gross headwind for the remainder of 2025, though this assumed higher China/U.S. tariff rates prior to the 90-day deal announced in mid-May (link). Exports to China were ~50% of this impact, while the remaining ~50% was derived from imports from Europe to the U.S. These gross headwinds were expected to be largely offset, but there could be potential upside from the mid-quarter China tariff reduction. We also note DHR’s current 2025 EPS guidance includes an incremental ~$100M of pre-tax cost savings as a “cushion,” which could provide some insulation should we see elevated country-specific tariff rates go into effect in the future."

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