Argus Starts Coverage On Danaher-Spinoff Fortive At Hold

While the brokerage has kept an Overweight rating on the industry, Argus believes Fortive shares are trading above the broader market- and industry-average multiples. The analyst pointed out that the 0.5 percent yield is below the industry average. Therefore, Staszak preferred to take a fresh look at the stock if there is a selloff "to the upper $40" level.

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The brokerage does not think Fortive is in the same league as Danaher was just a decade back. In a research note to clients, Argus said, "We think that Fortive, with its relatively high leverage, will find it difficult to duplicate Danaher's record of growth through acquisitions, and believe that it could itself become an acquisition target. We also believe the current FTV share price fails to account for the cyclicality of the company's businesses and the likely difficulty of improving near-record margins."

The analyst thinks that the company would have to depend too much on its capability to make acquisitions to enhance its margins and earnings. For the current year, Staszak estimates EPS of $2.45 on $6.1 billion revenue. Similarly, for the next year, he expects EPS of $2.61 on $6.3 billion revenue driven by drop in expenses.

At time of writing Thursday, Fortive was seen down 0.89 percent at $52.47, while Danaher was down 0.29 percent at $79.12.

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