The latest beat-and-raise quarter from Danaher is reviving Wall Street’s hopes for the stock. Can it last? Danaher, a supplier of tools and equipment to drugmakers and hospitals, had been known for decades as an impeccably run company with reliable stock outperformance. However, since its Covid-era record close of nearly $295 per share in September 2021, the stock has struggled. Some of the reasons were out of Danaher’s control. After all, the environment for companies like Danaher that serve the biotech and pharmaceutical industries has been tough following the pandemic. Plus, the company, like many American firms, has struggled in China. However, Jim Cramer has been highly critical this year of what he feels has been management’s complacency in addressing the challenges. Nevertheless, Danaher sits at a crossroads after what Jim described as the quarter “we’ve been looking for,” shelving his frustration to see whether Danaher can keep it up. DHR 5Y mountain Danaher 5-year performance Shares of Danaher jumped nearly 6% to nearly $221 on the company’s Oct. 21 earnings day. In addition to earnings-per-share and revenue in the third quarter exceeding expectations, sales and adjusted operating income in the company’s biotechnology and diagnostics segments advanced year over year and beat expectations. In life sciences, however, sales were flat and missed estimates, while income dropped but beat forecasts. As of Monday’s close, Danaher stock has slipped 3% from those post-earnings highs, leading investors to wonder whether the rally has fizzled. It happened before. Shares saw a nice bump after second-quarter earnings were reported on July 22, which lasted about a month. Then a sharp downturn took the stock to the low-$180s in late September to around the worst levels in five years. On Sept. 25, we added back 20 of the 100 shares sold in July on the belief that the selling had become overdone. The stock got back-to-back wins after Pfizer’s Sept. 30 deal with the White House alleviated some of investors’ biggest fears around the Trump administration’s pharmaceutical policy proposals and Danaher’s life sciences subsidiary, Leica Biosystems, unveiled artificial intelligence-powered digital pathology tools. While Danaher got another leg up on earnings, we can’t help but question whether the stock has more gas in the tank. Following the Q3 results, we downgraded Danaher to our 2 rating, meaning we would look for lower levels as possible buying opportunities, and reiterated our $240 price target. The real spark for investors alongside the latest earnings was the company’s 2026 core revenue guidance, which they project to grow between 3% and 6%. KeyBanc analysts said recently that the projection could put Danaher’s revenue growth on a pace “not seen since 2022.” While the analysts largely see those projections as achievable, the company will need to tighten execution across its entire business to hit the higher end of its range. Danaher’s most profitable division, biotechnology, will be the primary driver of next year’s growth. The business realized 6.5% core revenue growth in the third quarter. According to Leerink Partners, that core revenue growth surpassed expectations of 6%. Leading the gains within biotech was bioprocessing, operated through its subsidiary Cytiva. The business is recovering thanks to strong global demand for biologic medicines, particularly monoclonal antibodies that are critical for cancer and other disease treatments. Cytiva, which supplies filtration, single-use hardware, and other manufacturing tools for biologic drugs, saw high single-digit core revenue growth. Danaher expects similar growth in 2026, driven by consumables. Despite the favorable outlook in this section, Danaher still has more to figure out in diagnostics. “A big chunk of the diagnostics platform is not growing at all,” Wells Fargo analyst Brandon Couillard told CNBC in an interview. The analyst pointed to further China headwinds, which the company factored in again for 2026. The Chinese government’s strategy to mitigate health-care costs there, known as volume-based procurement, along with last year’s reimbursement changes, are still pressuring the business. More work is also needed in life sciences, which saw the least growth this year. The unit was estimated to be flat in 2026. “You need to see a recovery there for them to grow at the high end of their 3 to 6 [percent] range for next year. That’s the one that’s probably the hardest to get a lot of conviction around because of the mix of businesses that are in there,” Couillard said. Despite the roadblocks, Couillard is part of the Wall Street cohort that sees upside for Danaher, raising his price target to $230 from $205. Pharmaceutical reshoring — Trump’s push to bring drug manufacturing back to the United States — could be another catalyst for Danaher. But not right away. Leerink analyst Puneet Souda said it could take an estimated three to five years for Danaher to reap the benefits of reshoring, if plans go accordingly. “This is a tailwind, but it remains to be seen. These are significant commitments,” Souda told CNBC, in a nod to the investment pledges leading pharmaceutical companies have made to the U.S. “However, they’re [still] on paper today,” the analysts said. “I’m not assuming any facility or onshoring built out into my numbers into next year or even in 2027.” Bottom Line While the Club is happy to see Danaher moving in the right direction, we did trim 70 shares on Oct. 27 out of discipline, given the stock’s recent recovery and the S & P Short Range Oscillator ‘s move, at the time, into overbought territory. The sale resulted in a roughly 7% loss on shares we purchased back in March and April 2022. We’re still long-term believers in Danaher’s science and margin recovery story, but for now, we decided to sell into strength. (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. 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Danaher stock may be turning the corner. What needs to happen to keep it that way
