Life Science Tools & Diagnostics Latest Thoughts on the Group and Key Themes Heading into 2Q Earnings

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Life Science Tools & Diagnostics Latest Thoughts on the Group and Key Themes Heading into 2Q Earnings

ts. Additionally, within healthcare, investors

are increasingly looking at tools as an area with potential positive estimate revisions

should incremental end-market improvement pan out, with longer-term upside drivers

related to reshoring and AI-driven acceleration in drug development looking more visible

(more on both below). As such, our sense is that positioning skews long tools and short

medtech on a relative basis (consistent with the medtech sentiment JPM analyst Robbie

Marcus noted in his 2Q earnings preview several weeks ago).

• Companies that screen as crowded from a long perspective from our conversations

include TMO, WAT, DHR, ILMN (and in Dx GH and NTRA, the latter of which is seeing

benefit from inclusion in the XBI). For DHR and TMO specifically into the print, 1Q

organic growth of +50 bps and +100 bps, respectively, drove a capitulation in sentiment

several months ago and clouded visibility into upside for the year, but into 2Q, from our

perspective, investor expectations are for both to see upside in 2Q on incremental end-

market improvement, though we believe 2026 Street numbers will likely remain in the

+3–4% range for both. From a LO perspective, we believe this is more of a “check the

box” quarter and not the inflection in growth needed to step off the sidelines, though a

continuation of improvement in 3Q/4Q that improves visibility into MSD+ growth in

2027 could be enough to generate more LO involvement in light of valuations. In terms

of sentiment elsewhere in tools, WAT has been a company we have received a healthy

amount of interest in from both HFs and LOs that are bullish on the management

execution story following the strong BD quarter in 1Q.