The move marks yet another strong performance from a company with a reputation for being one of the highest-quality names in the industrial sector. Its former CEO and current General Electric (NYSE:GE) CEO, Larry Culp, receives a lot of media attention for his highly successful stewardship of Danaher (and rightly so), but current CEO Tom Joyce is also highly deserving of praise.
Not only has Joyce successfully integrated Pall Corp. into Danaher, but he's also overseen the spinoff of Fortive (NYSE:FTV) in 2016 -- as you can see in the chart below, both stocks now trade on higher multiples than when the spinoff occurred -- and then took decisive action in planning to spin off the underperforming dental segment (to be called Envista Holdings) in 2019.
It gets better. Earlier in the year, Joyce went back to his former boss and agreed to a deal to buy GE's biopharma business for $21 billion in cash (and only $400 million in pension liabilities) in order to transform Danaher into a more focused life sciences and diagnostics company. It gets even better, because it's subsequently been revealed that the biopharma business is generating around a $1 billion in free cash flow (FCF) -- meaning Danaher paid just 21 times FCF for a growth business with strong recurring revenue.
Moreover, the company's guidance for core revenue growth of 4% in 2019 looks conservative given 5.5% growth in the first quarter and guidance for 4%-5% in the second quarter, and there was even some good news from the return to low single-digit growth by the dental segment in the first quarter -- good news ahead of the spinoff.
As you can see above, it's been a pretty good year on the operational and corporate activity fronts for Danaher, and it's not hard to see why the market has warmed to the stock. Joyce is clearly positioning Danaher for long-term growth through a series of bold and value-enhancing decisions, all the while continuing the company's reputation for a reputation for excellent operational execution.
Looking forward, investors will be hoping for a successful spinoff of the dental segment in the second half of 2019 and then the completion of the acquisition of GE Biopharma in the fourth quarter. Turning to immediate matters, Joyce promised he would update investors on full-year guidance during the upcoming earnings call in July -- don't be surprised if there's an upgrade to underlying growth expectations.
All told, there's a lot to look forward to with Danaher in 2019.