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Will Danaher (DHR) Beat Q2 Earnings Estimates this Season? - Analyst Blog

Danaher Corp.DHR is scheduled to report second-quarter 2015 earnings results before the opening bell on Jul 23. In the preceding quarter, the company's adjusted earnings came in line with the Zacks Consensus Estimate. Notably, for the trailing four quarters, the stock posted an average positive surprise of 0.27%.

Let's see how things are shaping up for this announcement.

Factors to Consider

The Danaher Business System (''DBS''), which focuses on critical areas of quality, delivery, cost and innovation, continues to be a key driver of the company's performance. During first-quarter 2015, DBS helped nine operating platforms of Danaher to witness growth at mid-single-digit and a higher rate, thereby boosting the company's organic revenue growth as well as core margin. If the past trend is an indication, we expect DBS to support growth in the to-be reported quarter as well.

The company's proactive acquisition strategy is quite encouraging, as it serves to supplement growth. The acquisitions of NetScout Systems and Pall Corp (pending) are significantly positive in these regard.

Danaher recently completed the acquisition of NetScout Systems.. The combined entity is expected to become a leading global provider of network management tools and security solutions, thus aiding the company's top-line growth, going forward.

Additionally, in May 2015, Danaher penned a merger deal for the takeover of Pall Corp., valued at approximately $13.8 billion or $127.20 per share. The transaction is expected to close by the end of the current year, subject to customary closing conditions. After the completion of the merger, Danaher has planned to split itself into two independent, publicly traded companies.

This apart, Danaher has significantly expanded its foothold in the healthcare and dental markets over the past few quarters. The rising proportion of ageing population in Europe and increased spending on healthcare and fitness bodes well for the company. As a matter of fact, Danaher had derived 35% of its revenues from Life Sciences & Diagnostics and Dental segments in the first quarter of 2015. We believe these segments will continue to witness strong growth in China, the U.S. and Europe for the second quarter too, thereby driving the company's profitability growth.

Earnings Whisper

However, our proven model does not conclusively show that Danaher is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP : Earnings ESP that represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate currently stands at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.04.

Zacks Rank : Danaher's Zacks Rank #3, when combined with 0.00% ESP, makes surprise prediction difficult. Note that stocks with a Zacks Rank #1, 2 or 3 have significantly higher chance of beating earnings.

We caution against stocks with Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks That Warrant a Look

Here are some stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

ITT Corporation ITT , with an Earnings ESP of +3.39% and Zacks Rank #1.

Fair Isaac Corporation FICO , with an Earnings ESP of +12.50% and Zacks Rank #1.

American Tower Corporation AMT , with an Earnings ESP of +14.29% and Zacks Rank #3.

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FAIR ISAAC INC (FICO): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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