As Wall Street attempted to hold on to recent gains on Tuesday, we received positive updates on two Club holdings seeing excessive moves to the upside: Danaher (DHR) and Constellation Brands (STZ). DHR 1Y mountain Danaher’s 1 year stock performance Danaher will present Tuesday afternoon at the JPMorgan Healthcare Conference. However, ahead of the event, on Monday night, the life sciences and medical diagnostics company released its slide deck. In addition to a high-level overview of what the company will look like following the spin-off of its Environmental & Applied Solutions business, it included an upward revision to its fourth-quarter outlook. Shares were up 4% on the positive revision. 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 be largely 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, compared to previous expectations for approximately $375 million in sales on this front. Last month, as part of its better-than-expected third-quarter results, Danaher forecast that core Q4 sales would remain stable on a percentage basis. The outlook for core business growth, which excludes sales related to Covid tests and includes sales of products supporting Covid-related vaccines and therapies, remained unchanged, with expectations for a high-single-digit increase. In addition to reviewing core sales growth, management is now considering no growth coming from Covid-related testing. Expectations had called for a high single digit to low double digit increase. The better-than-expected performance at Cepheid, along with the downward revision of the expected impact of Covid testing, may indicate a faster-than-expected shift from Covid-only testing to Cepheid’s best-in-class 4-in-1 respiratory test for Covid , Flu A, Flu B and RSV (Respiratory Syncytial Virus). The real concern for investors and what we’ll be listening closely to when the company presents later Tuesday is in the bioprocessing area. As a reminder, analysts at Credit Suisse downgraded shares of DHR last week believing that “exposure to bioprocessing stock reductions and diagnostics could put pressure on [Danaher’s] growth relative to peers.” We also highlighted this investor concern in our analysis of the company’s third-quarter earnings results, though we noted that any increased inventory levels were ultimately a short-term concern as they will eventually be processed. management said it is right now to work even more closely with customers than in the past to better understand production plans and reduce the risk of overstocking and avoid duplicate orders STZ 1Y mountain Constellation Brands 1-year inventory performance; analysts at Goldman Sachs reiterated their buying advice and said they “continue to believe concerns about the health of the Modelo brand are overblown. Nielsen EQ volumes for Modelo Especial continued to be under pressure in Nielsen’s latest data (albeit improved on a 2-week basis vs. through retailers). That said, we expect the impact of price increases to diminish in the coming months, as we have seen in previous similar circumstances.” In other words, demand seems to increase when prices rise, because everyone buys in anticipation of the price increase. business and builds inventory it then takes a bit to digest that appeal eventually things settle down and historically Constellation’s growth gets back on track after a few months that is expected to be the case this time around although it may take a little longer as price increases were seen throughout the value chain, meaning that the price to the end customer was slightly higher than it would normally be.California, an important state for Modelo, and the Mexican beer portfolio of Constellation, which also includes Corona and Pacifico, is one example of where this impact was particularly noticeable, including in Texas.However, as h As management noted on the call last week, California is already starting to recover. Aside from the price impact, the Goldman is one analysts said Modelo continues to gain market share, according to scanner data. It’s hard to argue that there is a trade-off to cheaper brands. Analysts are also encouraged by continued “positive feedback from our beer industry contacts from Beverage Bytes indicating that Modelo Especial continues to perform well and sales remain strong and growing.” Ultimately, we agree with the analysts’ view that concerns about Modelo are overblown. Victoria beer, one of the most popular brands in Mexico, in the US market, provides a positive catalyst in the future. (Jim Cramer’s Charitable Trust is long DHR, STZ. See here for a full list of the shares.) As a subscriber to the TBEN Investing Club with Jim Cramer, you receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charity’s portfolio. 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A trader works on the trading floor of the New York Stock Exchange (NYSE), January 5, 2023.
Andrew Kelly | Reuters
As Wall Street attempted to hold on to recent gains on Tuesday, we received positive updates on two Club holdings seeing excessive moves to the upside: danaher (DHR) and Constellation Brands (STZ).
