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Danaher Corporation (DHR - Analyst Report) reported earnings of 87 cents a share in the second quarter of 2013 (ended Jun 28) beating the Zacks Consensus Estimate by a couple of cents. The reported earnings represent a 3.5% year-over-year growth compared with the year-ago period.

The healthy increase in earnings was mainly attributable to core revenue growth and better margin expansion. In addition, most of its segments, barring Test & Measurement, reported a decent improvement in revenue.

Revenue

Danaher generated total sales of $4.7 billion in the quarter, up 4% year over year. Core revenues for the quarter were up 2.5% year over year, while revenues from acquisitions were up by 2.0%.  The reported revenue was in line with the Zacks Consensus Estimate.

Margins & Cash Flow

Danaher’s gross margin expanded by 100 basis points to 52.7%. The company’s operating profit was $844 million up by 4.0% year over year, while operating margin was flat year over year.

However, Danaher reported a drop in its cash flows. Operating cash flows were down by 14% to $899 million compared with $1,045 million in the year-earlier quarter. The company reported free cash flow of $763 million, down 18% year over year, due to a 22.5% rise in capital expenditures to $136 million. 

Segments

Revenues in the Test & Measurement segment were flat at $855 million. The segment recorded an operating margin of 20.9%, a decline of 0.60% from the prior year level of 21.5%.

Environmental revenuesreported the highest surge among all the operating segments, up 8% during the quarter to $827 million. The segment reported an operating profit margin of 21.6%, flat year over year.

Revenue for theLife Sciences and Diagnostics segment increased 5.5% year over year to $1.7 billion. The operating profit margin for the quarter was up 1.3% year over year to 14.4%.

Revenues from the Dental segment grew 3% year over year to $515 million with operating profit margin growing 0.90% year over year to 15.3%.

In the Industrial Technologies segment, revenues grew 2% to $867 million with an operating margin growth of 1.10% to 23.5%. This revenue growth was mainly driven by accretive acquisitions.

Conservative Fiscal & 3Q13 Outlook

Concurrent with the earnings release, management provided its guidance for third quarter and narrowed its outlook for full year 2013.

The company narrowed its previously announced full year 2013 earnings outlook and now expects earnings in the range of $3.37 to $3.42 per share from its previous guidance of $3.32 to $3.47. For the third quarter of 2013, the company’s earnings expectations are in the range of 78 cents to 83 cents a share.

Danaher currently carries a Zacks Rank #3 (Hold). Other companies in the industry that are worth considering at present include Marubeni Corporation , Hutchison Whampoa Ltd. (HUWHY) Macquarie Infrastructure Company LLC (MIC - Snapshot Report). While Marubeni carries a Zacks Rank #1 (Strong Buy), Hutchison and Whampoa, each carry a Zacks Rank #2 (Buy).

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