Goldman Sachs previews Americas Life Sciences Tools & Diagnostics 2Q26 earnings: terminal market modestly reaccelerating, but China stimulus orders materially weaker

Overview

This report is Goldman Sachs' Americas Life Sciences Tools & Diagnostics 2Q26 earnings preview, with key updates to the GS Tools Tracker and GS China Stimulus Tracker and discussion of TMO, DHR, WAT, A, BRKR, MTD, RVTY and several diagnostics peers. The report notes that the tools industry has clearly underperformed the broader market year-to-date, and the key debate is whether current weak growth reflects a structural impairment in long-term growth momentum or a temporary post-COVID normalization effect. Goldman Sachs leans toward terminal demand gradually improving, with several companies offering attractive valuation entry points, though the pace and durability of recovery remain uncertain.

Core views

Core views include: first, the tools industry is expected to gradually re-accelerate to organic growth in the second half of 2026, but this requires continuous improvement to reach or exceed full-year guidance; second, potential upside drivers include domestic demand for CDMO, a turning point in Bioprocessing equipment, easing headwinds in respiratory testing, improving financing in late-stage Biotech, downstream pharmaceutical manufacturing capex, and semiconductor-led Industrial strength; third, U.S. Academic & Government recovery remains relatively weak, and transmission from Preclinical Biotech financing to actual spending will take time; fourth, China stimulus-related orders declined overall in 2Q26, indicating limited remaining lift from China equipment renewal policies for most covered companies.

Analysis framework

The report forms its industry view through two Goldman proprietary tracking frameworks: the GS Tools Tracker compiles 17 quarterly data sets covering Biopharma, Industrial, Clinical Diagnostics and Academic/Government end markets, and estimates market growth with weights by relevance and tools-industry exposure; the GS China Stimulus Tracker follows awarded orders on equipment such as liquid chromatography, gas chromatography and mass spectrometry for companies including TMO, DHR, A, WAT and BRKR, where orders are tied to China equipment renewal stimulus. At the company level, Goldman Sachs combines 2Q26 or 3Q26 revenue, EPS, management guidance, valuation multiples and 12-month targets for investment calls.

Methodology notes

• Industry growth trackingGS Tools Tracker

  Estimate life sciences tools end-market growth using 17 quarterly data sets

  This model covers four end markets: Biopharma, Industrial, Clinical Diagnostics and Academic/Government, and applies weights based on data-set relevance and overall tools-industry exposure. The report states that this tracker has an 86% correlation with average tools-company revenue growth and is directionally correct in acceleration versus deceleration 80% of quarters.

• Policy and order trackingGS China Stimulus Tracker

  Track awarded instrument orders tied to China equipment renewal stimulus

  This tracker covers companies with China instrument business exposure such as TMO, DHR, A, WAT and BRKR, and has tracked more than 1,100 instrument orders since the China equipment renewal stimulus was launched in March 2024.

• Valuation methodsQ5-Q8 EV/EBITDA multiple

  Derive 12-month targets from forward-quarter implied EBITDA multiples

  TMO uses a target EV/EBITDA multiple of 19x and gives a $570 target price, DHR uses an implied target multiple of about 20x and gives a $230 target price, and WAT's target multiple was raised from 16x to 18x, moving the target price from $380 to $425.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Thermo Fisher Scientific (TMO)

  Buy rating, 12-month target price $570

  Strengths

  Diversified business, higher H2 weight of CDMO revenue, and improved CRO contribution after the Clario acquisition may provide additional upside; valuation compression makes the entry point more attractive.

  Weaknesses

  1Q growth was weak; U.S. Academic & Government and Preclinical Biotech spending still need time to recover.

  Comparison

  Compared with some peers, TMO is viewed as a high-quality, compound-growth company with several levers to beat 2026 guidance.

  Risks

  Weak early R&D end demand, pullback in large-pharma spending, downward revisions to long-term planning expectations, and ongoing weakness in U.S. Academic & Government.

• Danaher Corp. (DHR)

  Buy rating, 12-month target price $230

  Strengths

  Strong Bioprocessing base; 1Q Bioprocessing equipment orders rose 30%, which may translate into revenue over the next 6 to 18 months.

  Weaknesses

  Growth and margin expansion in 2026 are skewed toward the second half, with some near-term improvement tied to low-hanging-base effects rather than full demand rebound.

  Comparison

  DHR is relatively more directly exposed to Bioprocessing equipment reacceleration, but also more vulnerable to respiratory testing and China diagnostics policy noise.

  Risks

  Further weakness in Academic and early drug-discovery activity, continued adverse drift in China Diagnostics, and Bioprocessing equipment continuing to lag in 2026.

• Waters Corp. (WAT)

  Buy rating, 12-month target raised from $380 to $425

  Strengths

  Core business supported by downstream pharma demand, LC-MS replacement cycles, GLP-1 exposure and cross-selling; acquired assets still have upside in pricing, commercial execution and synergy.

  Weaknesses

  Shares were up about 20% after 1Q, shifting the market debate toward how much execution improvement is already reflected in valuation.

  Comparison

  The report views WAT as an execution-driven recovery story rather than one relying primarily on terminal demand recovery, making it eligible for a higher earnings multiple.

  Risks

  Integration risk from BD Biosciences and Diagnostic Solutions, large-pharma capex weakness, China policy and local competition, and macro headwinds on the industrial side.

• Agilent Technologies (A)

  Buy rating, report provides 3Q26 outlook

  Strengths

  High historical correlation with the Industrial tracker in CAM-related businesses, supported by improving semiconductor and industrial cycles; strong China and Chemistry performance could add upside.

  Weaknesses

  3Q26 guidance implies further sequential deceleration from 2Q, with a higher year-on-year comparison base next.

  Comparison

  Compared with TMO and DHR, A's short-term sensitivity is more reliant on industrial cycles and China-related performance.

  Risks

  Macro uncertainty, geographic normalization, inflation pressure, and weak China stimulus orders.

• Bruker Corp. (BRKR)

  Sell rating, but China stimulus order performance comparatively more resilient

  Strengths

  2Q26 China stimulus-related orders were up about 55% year-on-year, offering relatively better resistance to order decline than most other tool peers.

  Weaknesses

  The overall investment rating remains Sell, indicating Goldman Sachs still views company-level valuation or fundamental risk as unfavorable.

  Comparison

  BRKR performs better than most covered peers on the China stimulus order metric, but that is insufficient to change the overall cautious rating.

  Risks

  Volatile industrial cycles, macro uncertainty, and company-specific growth and valuation pressure.

Key data

• Tools sector YTD performance-9%The S&P 500 was +10% over the same period, indicating that the tools segment is materially underperforming.
• GS Tools Tracker long-term average growthabout 5%Generally consistent with management-reported estimates of sector market growth rates.
• GS Tools Tracker correlation86%The report states that the tracker has an 86% correlation with average tool-company revenue growth.
• 2Q26 China stimulus orders65 orders, YoY -57%Covers TMO, DHR, A, WAT and BRKR; BRKR orders were up about 55% year-on-year, relatively more resilient than peers.
• TMO 2Q26 outlookOrganic growth 3.1%, revenue $11.73bn, EPS $5.70FactSet consensus is revenue $11.71bn and EPS $5.72; Goldman Sachs maintains Buy and a $570 target price.
• DHR 2Q26 outlookOrganic growth 2.0%, revenue $6.10bn, EPS $1.84FactSet consensus is revenue $6.10bn and EPS $1.83; Goldman Sachs maintains Buy and a $230 target price.
• WAT 2Q26 outlookOrganic growth 4.6%, revenue $1.62bn, EPS $2.98FactSet consensus is revenue $1.62bn and EPS $3.01; Goldman Sachs maintains Buy and raises target price to $425.
• A 3Q26 outlookOrganic growth 5.7%, revenue $1.85bn, EPS $1.49FactSet consensus is revenue $1.84bn and EPS $1.49.

Impact & implications

For portfolio construction, the report supports selective exposure within the life sciences tools segment rather than broad beta chasing. The investment case for TMO and DHR relies more on recovery in underlying terminal demand and the transmission of CDMO or Bioprocessing orders into revenue; WAT is more execution-led, with recovery driven by acquisition integration, pricing and cross-sell. Weakening China stimulus orders suggest that income elasticity from China-related revenue cannot be extrapolated mechanically, while industrial cycles, semiconductor capex and macro risks will still impact near-term results for names such as A, BRKR and WAT.

Risks

• U.S. Academic & Government spending recovery may underwhelm, especially as NSF funding has posted negative growth for multiple consecutive quarters.
• Improving Preclinical Biotech financing needs more than a year to translate into actual capex, so short-term spending may remain cautious.
• China equipment renewal stimulus orders declined 57% year-on-year in 2Q26, suggesting weaker-than-expected support for China-related tools businesses.
• Macro and geopolitical factors in regions such as the Middle East could affect covered-company regional revenue exposure, and GS Tools Tracker has limited representation for that region.
• Timing for Bioprocessing equipment order-to-revenue conversion is uncertain and could lead to a slower-than-expected 2H acceleration for names like DHR.
• Execution, pricing, manufacturing and market-share risks from WAT's integration of acquisition assets could impair its execution-driven recovery thesis.

What to watch

• Management commentary on terminal market health and the credibility of faster 2H organic growth during 2Q26 earnings calls.
• TMO commentary on U.S. domestic CDMO order flow and demand implications after the U.S. Department of Commerce Tariff-reduction Application deadline.
• Whether DHR's Bioprocessing equipment orders can convert into revenue faster than expected during 2026.
• Commercial execution, pricing, synergy and cross-sell progress of WAT's acquired assets.
• Whether China equipment renewal stimulus orders recover in subsequent quarters, particularly instrument award dynamics for TMO, DHR, A, WAT and BRKR.
• The effect of Industrial PMI, semiconductor capex and durable goods new orders on the industrial exposure of companies such as A, BRKR and WAT.