The Big Value Theme for Danaher: Is a Breakup in the Works?

Danaher Corp. (NYSE: DHR) is already close to an all-time high, and now there is some talk that the diversified conglomerate will be broken up. Several reports are driving interest on Thursday. One issue that could be driving some of the change here is that the company is also in the midst of a CEO transition.

The first issue to consider is that Citigroup added the company to its US Focus List on Thursday. The team there sees multiple catalysts coming its way, and it set an $88 price target. J.P. Morgan also reiterated its Overweight rating this week, along with an $85 price target.

This last run may be simply from nothing more than a Jim Cramer endorsement on CNBC as his pick going into June. He said that the two analyst reports would indicate that something is going on and that perhaps a breakup to unlock more value is in the cards for its shareholders. Cramer also said he thinks the earnings report will be good.

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Barclays talked up Danaher in a research report on May 12 as well, but that was in a part of a broader multi-industry industrial sector call. Also, at the end of April we saw that S&P Equity Research raised its rating to Buy.

Danaher has an unusually large amount of Goodwill on its balance sheet, but that is because the company has made more than 400 (yes, four hundred) acquisitions since 1984. The company’s main business segments are as follows: Test and Measurement, Environmental, Dental, Life Science and Diagnostics, and Industrial Technologies. The company’s market cap is now $54 billion.

Danaher announced back on April 16, that Thomas Joyce Jr. would be replacing Lawrence Culp Jr. as chief executive upon his retirement in March of 2015. The company showed that Joyce began his career at Danaher in 1989 as a Marketing Project Manager in the Danaher Tool Group, and that he has led the acquisition and integration of many of Danaher’s leading brands.

It may seem hard to consider that a company of this sort would break itself up. Still, Wall Street often convinces many companies that they need to divest assets or go through entire changes.

Danaher shares were up 1.4% at $77.33 on last look, and the 52-week range is $59.65 to $78.80. Thomson Reuters has a consensus price target value just above $85.

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