As Wall Street tried to hang on to recent gains on Tuesday, we got some positive updates on two Club holdings that are experiencing outsized upside moves: Danaher (DHR) and Constellation Brands (STZ). Danaher’s one-year stock performance from DHR 1Y mountain Danaher will be presented at the JPMorgan Healthcare Conference on Tuesday afternoon. However, before the event on Monday evening, the life sciences and medical diagnostics company launched its slide platform. In addition to providing a high-level look at what the company will look like after the spin-off of its Environmental and Applied Solutions business, it included an upward revision to fourth-quarter guidance. Shares rose 4% on the positive review. Some investors were concerned that management would announce weak earnings. Now, management sees core sales growth in the high single-digit range. The increase can largely be attributed to better-than-expected performance in Cepheid’s molecular diagnostics business, which earned more than $1 billion in breath testing revenue in the quarter vs. previous guidance for about $375 million in sales on that front. Last month, as part of its better-than-expected third-quarter results, Danaher forecast core sales would be flat to low single-digit percentages in the fourth quarter. The business’ core revenue growth guidance, which excludes sales related to Covid testing and includes sales of products supporting Covid-related vaccines and therapeutics, was left unchanged, with expectations of a high single digit increase. In addition to the core revenue growth revision, management is now not factoring in any growth coming from Covid-related testing. Expectations had called for a high single-digit to low double-digit increase. The better-than-expected performance in Cepheid, coupled with the downward revision of the expected impact of Covid testing, may indicate a faster-than-expected shift from Covid-only testing to the better Cepheid’s 4-in-1 breath test. . for Covid, Flu A, Flu B and RSV (Respiratory Syncytial Virus). The real concern for investors, and what we’ll hear closely when the company files later Tuesday, is on the bioprocessing front. As a reminder, Credit Suisse analysts downgraded DHR shares last week believing that “exposure to bioprocessing inventory drawdowns and diagnoses could pressure [Danaher’s] “We also highlighted this concern among investors in our analysis of the company’s third-quarter earnings results, although we noted that any high inventory levels were ultimately a short-term issue as they will eventually be resolved. .is working even more closely with customers now than they have in the past to better understand production plans and reduce the risk of excess inventory and avoid double ordering STZ 1Y mountain Constellation Stock Performance Brands 1-year ;. Shares of Constellation Brands rose 2% on Tuesday after Goldman Sachs analysts reiterated their buy rating, saying they “continue to believe concerns are overblown about the health of the brand model Nielsen EQ volumes for Modelo Especial remained depressed in the latest Nielsen data (although they improved in 2 weeks vs. 4 weeks), but this was widely anticipated given the amount of pricing recently introduced in the market throughout the value chain (from STZ). “As a reminder, management also pointed to this price/demand dynamic on the earnings call, noting that ‘the impact of our decline increases has been magnified by additional price actions across the value chain.’ That said, we expect the impact of incremental pricing to settle over the coming months, as we’ve seen in similar circumstances before. “In other words, demand seems to take a hit when prices go up because in anticipation of the price increase, everyone buys cases and builds inventory; then it takes a while to digest that push forward. Ultimately , things are adjusting and historically Constellation’s growth is back on track after a few months.This is also expected to be the case, although it may take a little longer as the price increases are across the value chain, meaning the price to the end customer was a bit higher than would normally be the case.California, a key state for Modelo, and Constellation’s Mexican beer portfolio, which also includes Corona and Pacifico, is one example of where this impact was particularly noticeable, Texas as well. However, as management noted on last week’s call, California is already starting to recover. The impact of prices aside, the Goldman Analysts will d ir that Modelo continues to take market share, according to scanner data. It’s hard to argue that there is a shift to cheaper brands. Analysts are also encouraged by continued “positive feedback from our Beverage Bytes beer industry distributor contacts indicating that Modelo Especial continues to perform well with sales that remain strong and growing.” Ultimately, we agree with analysts’ view that concerns about Modelo are overblown, and as noted during Tuesday’s “morning session,” we believe investors should consider the the company’s strong cash flow performance and considering that the company has yet to introduce La cervesa Victoria, one of Mexico’s most popular brands, to the US market, providing a positive catalyst going forward . (Jim Cramer’s Charitable Trust is long DHR, STZ. See a full list of stocks here.) As a subscriber to the CNBC Investing Club with Jim Cramer, you’ll receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a share in his charitable trust portfolio. If Jim has discussed a stock on CNBC TV, wait 72 hours after issuing the trade alert before executing the trade. INFORMATION ON THE ALTERNATE INVESTMENT CLUB IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, WITH OUR DISCLAIMER. NO OBLIGATION OR FIDUCIARY DUTY EXISTS OR IS CREATED BY YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTOR CLUB. NO SPECIFIC RESULTS OR BENEFITS ARE GUARANTEED.
A trader works on the trading floor of the New York Stock Exchange (NYSE), January 5, 2023.
Andrew Kelly | Reuters
As Wall Street tried to hold on to recent gains on Tuesday, we got some positive updates on two Club holdings that are seeing outsized upside moves: Danaher (DHR) and Constellation Marks (STZ).
