Analyst Note| Julie Utterback, CFA |
In advance of its investor day on Thursday, Danaher announced the planned divestiture of its environmental and applied solutions group in late 2023 and a slight increase in its 2022 outlook, which appear to be pushing up shares. However, our fair value estimate may not change materially unless Danaher can realize more value for the asset at the time of the spinoff than we recognize in our combined model. Positively though, we appreciate this divestiture plan strategically, as it may slightly increase the durability of Danaher's switching cost moat source by focusing exclusively on life sciences and diagnostics. While we suspect our narrow moat and stable moat trend ratings will not change materially on this business mix shift, our capital allocation rating (currently on the strong end of Standard) may rise to Exemplary based on our increasing appreciation for Danaher's investment strategy and anticipated execution after this divestiture.