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Investing.com -- The U.S. life science sector is showing signs of recovery after navigating challenging market conditions, with certain companies positioned to outperform their peers, according to a new analysis from Rothschild.
The firm has identified several standout performers that are demonstrating resilience and growth potential despite ongoing pressures in China and fluctuating biopharma capital expenditure.
Agilent (NYSE:A) was newly initiated with a Buy rating and $165 price target, representing 19% potential upside.
Rothschild views Agilent as a leading pure play in life science instruments with diverse end markets (only 34% of revenue from Pharma) and an impressive 64% recurring revenue.
Despite two challenging years, the company has shown early signs of inflection with organic revenue growth of 5% in Q2 FY25 and 6% in Q3 FY25. China performance has notably improved, returning to growth in recent quarters.
Rothschild forecasts a FY25E-29E EPS CAGR of 11%, approximately 100 basis points above consensus, supported by above-sector margins, expansion into high-growth markets, and strong pricing power.
The company’s strong free cash flow provides substantial financial flexibility for future capital deployment.
In other news, Agilent received an upgrade to Buy from Neutral by analysts at UBS, who cited the company’s growth leadership potential.
Agilent also launched a new line of high-performance liquid chromatography (HPLC) columns designed for biotherapeutics applications.
Thermo Fisher Scientific (NYSE:TMO) was maintained at Buy with an increased price target of $575 from $525.
Rothschild believes Thermo Fisher is well-positioned to benefit from key structural healthcare trends, including biologic drug advancement, gene and cell therapy, and personalized medicine.
The company’s market leadership in mass spectrometry and electron microscopy supports confidence in a return to growth. As the sole end-to-end life science tools and services provider through its integrated contract research and manufacturing capabilities, Thermo Fisher is expected to continue gaining market share.
Rothschild forecasts 2025-28E revenue and EPS CAGRs of 5.5% and 9.3% respectively, with over $44 billion in deployable free cash flow through 2029E to fund capital returns and acquisitions.
Thermo Fisher Scientific recently priced a public offering of $2.5 billion in senior notes across four maturities. Additionally, analysts at Bernstein reiterated an Outperform rating on the company.
Danaher (NYSE:DHR) was downgraded to Neutral with a reduced price target of $220 (from $245), implying 5% potential upside.
While Danaher has successfully transformed from a diversified industrial to a focused life sciences leader, Rothschild notes that a return to historic high-single-digit growth won’t materialize in FY26.
Despite growth stabilization in 2024/1H25 led by its Biotechnology division, challenges remain in China and other markets.
Rothschild forecasts a 6.5% revenue CAGR for FY25-28E and an 8.7% EPS CAGR, which is 3% below consensus adjusted EPS by FY27E. The firm believes Danaher’s premium valuation at 25x P/E and 2.9x PEG doesn’t adequately reflect below-sector earnings growth and exposure to commoditized IVD markets.
Danaher reported second-quarter 2025 earnings that surpassed analyst expectations, with revenue reaching $5.94 billion and an EPS of $1.80.
The company also announced a quarterly cash dividend of $0.32 per share.
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