What happened

Shares of Danaher (DHR 2.52%) were down more than 14% as of Monday at 11:45 a.m. The industrial science and technology conglomerate announced Saturday it had completed the spinoff of its environmental and applied solutions segment into the new public company Veralto (NYSE: VLTO). Danaher stock is down more than 9% year to date.

So what

Under the terms of the spinoff, Danaher stockholders got one share of Veralto for every three shares of Danaher stock they owned. The move is meant to allow Danaher to focus more on its biotechnology, life sciences, and diagnostics segments while allowing Veralto to be more focused on its core business, which comprises two segments: water quality, and product quality and innovation. Danaher remains a huge conglomerate with 65,000 employees and 15 operating companies under its umbrella.

Now what

Danaher investors now have a choice whether to keep or sell Veralto stock. The new company carries $2.6 billion in gross debt and appears to have less potential for growth than some of Danaher's remaining segments.
Danaher is scheduled to report third-quarter earnings on Oct. 24. In the second quarter, its revenues fell 7.5%, year over year to $7.2 billion, and earnings per share (EPS) were $1.49 compared to $2.05 in the prior-year period. However, Veralto contributed to that decline with a profit margin of 22.8%, compared to the company's overall average operating profit margin of 28.4%. The other big factor, though, was that Danaher faced -- and will continue to face -- declining revenues from COVID-related testing.