© Reuters. Danaher’s (DHR) Move to Spin Off EAS Business Seen as a ‘Margin Play’
By Senad Karaahmetovic
Yesterday after market hours, Danaher (NYSE:) announced it plans to separate its Environmental & Applied Solutions (EAS) segment to create an independent, publicly traded company.
The new company will consist of Danaher’s Water Quality and Product Identification businesses once the spin-off is completed, which is expected to take place in the fourth quarter of 2023.
“Danaher will become a more focused science and technology leader committed to innovation and making a profound impact on human health,” said Rainer M. Blair, President and Chief Executive Officer.
Moreover, DHR also said its core revenue growth is tracking ahead of the prior guidance.
Here’s what Street analysts have to say about the announcement.
A Wells Fargo analyst said: “When analyzing the TTM core organic growth (ex. all COVID) and EBITDA margin trends for NewCo DHR vs. Legacy DHR, it becomes clear to us that the recent margin decay in the EAS business is a likely driver of the spin.”
A Credit Suisse analyst added: “We believe the EAS spin-off further optimizes Danaher’s business profile on Life Sciences & Diagnostics. Our initial SOTP analysis supports ~$340 target price as both EAS and Danaher deserve higher multiple compared to peers.”
A Cowen analyst noted: “We expect a positive impact on DHR (stock up 4% in a/m) given EAS can create more value as standalone, and we expect DHR remainco to see multiple expansion as a pure-play life science company. DHR also pre-announced a 3Q beat driven by COVID testing.”
DHR shares are up over 4% in premarket Thursday trading.
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