By Teresa Rivas
Danaher isn't a household name, but if you were ever tested for Covid-19 at a clinic or doctor's office, its products may have been up your nose. The Washington, D.C.--based conglomerate makes medical and scientific tools, spanning research to diagnostics, including Covid tests by its Cepheid division -- one of the first-approved and widely used versions. Since the height of Covid in 2020-21, circumstances for Danaher have worsened.
From the pandemic's aftermath to ever-changing U.S. policies, a number of factors have worked against the company in recent years, leaving its stock in the dust. That could finally change in 2026.
After the frenzy of the pandemic died down, there was less demand for diagnostics -- even those tests that cover things like flu and RSV, which Danaher also makes. In addition, the company's customers stockpiled its equipment earlier in the decade, and are still working through that inventory as medical research and testing have slowed. Demand similarly declined in Europe and China.
At the same time, the tariff roller coaster, along with the current administration's rapid swings in government policy and anti-science stances, had a chilling effect on research and development, meaning these pharmaceutical firms and biotechs ordered less of the consumables that Danaher makes. A lack of acquisition opportunities -- Danaher's dealmaking is top notch and often a stock catalyst -- has led to slower growth, too.
Add it all up, and it's easy to understand why the shares went basically nowhere in 2025, and are badly trailing the broader market over the past five years, up just about 11% compared with the S&P 500's 82% gain.
This year could look different. "There's a light at the end of the tunnel," says Joseph Ghio, an equity research analyst at Williams Jones Wealth Management.
With tariff rules finalized, drugmakers "will be incentivized to spend on R&D, and Danaher can offer end-to-end drug development" equipment, Ghio says. "Now that pharma companies know the rules and how to play the game, they will reinvest back into their pipeline...and we've already been through a multiyear destocking phase," meaning pandemic-era equipment has been almost entirely used up.
Orders should start flowing again at the same time that trials are showing increasing promise for monoclonal antibodies, or mAbs. These treatments, which target specific proteins and help patients' immune systems fight disease, are an area where Danaher has a lot of exposure. Demand for biologic medicines has grown by double digits annually for more than a decade and should continue apace.
The company's ultraclean balance sheet will also allow it to start mergers-and-acquisitions activity again as soon as valuations come more in line with Danaher's targets, and "this is a company that typically performs best when it's making deals," Ghio notes. It has long had success with the Danaher Business System, an operating framework that emphasizes efficiency and innovation and allows the company to make acquired businesses more profitable over time.
KeyBanc Capital Markets analyst Paul Knight likewise says a resumption of M&A activity could be the spark that turns the shares' long slump around. "Danaher has the financial flexibility to execute a $10 billion+ transaction," he wrote in mid-December, which could translate into half a billion dollars in incremental earnings before interest, taxes, depreciation, and amortization, or Ebitda. He thinks the stock should trade to $310, more than 30% above its current level.
Of course, there's no guarantee Danaher will ink new deals in 2026, but even if it doesn't, it seems poised to do better than it has in recent years.
Consensus calls for the company to return to earnings per share growth when it reports 2025 fourth-quarter results in late January, after years of declines: EPS of $7.71 would represent an increase of just over a 3% from last year, but 2026 estimates of $8.41 imply more than 9% year-over-year growth.
In other words, "it's time," as Morgan Stanley analyst Kallum Titchmarsh wrote when he initiated coverage of the stock in early December with an Overweight rating and top pick ranking. "[W]e are more optimistic on the setup into 2026 and believe Street numbers now provide a reasonable starting point."
His optimism is bolstered by his recent survey of over 50 R&D executives from both large and small biopharma companies, who on average expect their budget will be 9.2% higher in 2026 than it was in 2025. That "paints a more optimistic picture" for the industry, Titchmarsh writes.
Still, after underperforming for so long, Danaher is likely a show-me story. If its customers' spending on equipment remains depressed, or it continues to struggle with pricing power in key markets like China, or investors simply believe the company has lost its way, it will be difficult for the stock to break out.
Yet trading around 28 times 2026 expected earnings means it's cheaper to bet on Danaher now than it has been in several years; its five-year average is above 38 times. The "multiple still looks comparatively attractive versus peers and history," notes Titchmarsh. And although its dividend yield is a modest 0.5%, it spent some $2 billion on share repurchases in the third quarter alone.
In short, 2026 looks like the year Danaher stock generates healthy returns again.
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(END) Dow Jones Newswires
January 08, 2026 08:00 ET (13:00 GMT)
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