NEW YORK — Barclays on Tuesday initiated coverage of Danaher, Ortho Clinical Diagnostics, and Thermo Fisher Scientific with Overweight ratings. The investment bank set a price target for Danaher at $260, Ortho at $25, and Thermo Fisher at $525.
In a research note, Barclays analyst Luke Sergott said that Danaher's diagnostics business supplies the world with COVID molecular diagnostics tests through its Cepheid business, and Barclays sees Danaher's "guidance of double-digit top-line growth for 2021 offering plenty of upside opportunity depending on several factors, most notably the success of vaccine rollouts." Danaher's fiscal year 2021 guidance implies about $1.35 billion in COVID diagnostics revenues, which could add about $.55 to $.65 to its earnings per share, Sergott said.
He further noted that Ortho Clinical Diagnostics' markets ─ including clinical chemistry, immunoassay, blood donor screening, and immunohematology ─ are growing at between 3 percent and 5 percent annually. However, Ortho "has managed to outpace the market due to its scale, massive installed base [of 20,000 instruments], and investment in innovation that leads to upgrade cycles and consistent growth among its 90 percent recurring revenue streams," Sergott added.
In the event that COVID becomes "a global issue for many years to come," coronavirus revenues for Thermo Fisher would become "a regular part of the business and we can see significant upside to [Wall Street estimates] in the out years," Sergott said. However, if current vaccines eradicate the disease in a year, Thermo Fisher would "face declining top-line growth until the business normalized away from COVID," he added.
Thermo Fisher continues to seek companies that enable it to capitalize on existing trends in adjacent areas, and its recent purchase of Mesa Biotech fits within that strategy, Sergott said.
In Wednesday morning trading on the New York Stock Exchange, Thermo Fisher's shares were down about 1 percent to $457.15 and Danaher's shares were down about 1 percent to $221.85. Shares of Ortho rose less than 1 percent to $17.69 in morning trading on the Nasdaq.