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Danaher Corporation (DHR - Analyst Report) reported earnings of 96 cents a share in the fourth-quarter 2013 which beat the Zacks Consensus Estimate by a penny. The results increased 10.3% compared to the earnings of 87 cents a share reported in the prior-year period.

The company’s GAAP earnings increased 25% to $1.11 per share compared with 89 cents a share in the prior-year quarter.

Danaher’s proforma earnings in 2013 were $3.42 per share compared to the last year’s figure of $3.23 per share. The earnings beat the Zacks Consensus Estimate of $3.41 per share by a penny. Danaher reported GAAP net income of $2.7 billion, or $3.80 per share, up from $2.3 billion or $3.23 per share in reported in 2012. 

The healthy increase in earnings was mainly attributable to core revenue growth and better margin expansion. Specific initiatives for new product development and increased investment were the other positives for the company.

The company’s robust cash and balance sheet position and the effectiveness of the Danaher Business system were some of the key catalysts which drove the company’s results. In addition, all of its segments reported a decent year-over-year improvement in revenues.

Revenues

Danaher generated total sales of $5,266.7 million in the quarter, up 6.0% year over year. Core revenues for the quarter were up 3.5% year over year, while revenues from acquisitions were up 3.0%, partially offset by adverse currency translation effects of 0.5%. Reported revenues exceeded the Zacks Consensus Estimate of $5,202.0 million by a marginal 1.2%.

Danaher reported revenues of $19.1 billion for the fiscal 2013, up 4.7% from the last year’s figure of $18.3 billion.

Margins

Danaher’s gross margin expanded 33 basis points (bps) to 51.5%. The company’s operating profit was $888.0 million, an increase of 2.9% year over year, while operating margin declined marginally to 16.9% from 17.3% at the end of the quarter.

Segments

Revenues in the Test & Measurement segment increased 4.0% to $898.3 million year over year. The segment operating margin declined to 16.6% from 18.7% in the prior-year period.

Revenues in the Environmental segment were up 10.0% to $936.1 million. The segment reported an operating margin of 22.5%, a decline of 50 bps from 23.0% in last year.

Life Sciences and Diagnostics revenues were up 5.5% year over year to $1,939.6 million. The operating margin for the quarter was up 250 bps year over year to 16.7%.

Revenues from the Dental segment grew 3.5% year over year to $590.2 million with operating margin declining 150 bps to 13.7%.

In the Industrial Technologies segment, revenues grew a marginal 1.4% to $902.5 million, but operating margin dipped 80 bps to 17.3% on a year over year basis.

Balance Sheet & Cash Flow

Danaher exited 2013 with cash and equivalents balance of $3.1 billion versus $1.7 billion in 2012. The company had a long-term debt balance of $3.4 billion at the year-end 2013, down from $5.3 billion in the previous year.

Danaher’s cash flow from operating activities was increased 5.0% to $3,585.3 million compared with $3,415.0 million in the prior year.

Outlook

Concurrent with the earnings release, management provided its guidance for first-quarter and full year 2014 revenues and earnings.

The company has reaffirmed the guidance for the full-year 2014 earnings in the range of $3.60 to $3.75 per share and revenue growth in the range of 2% to 4%. For the first quarter of 2014, the company’s GAAP earnings are expected to be in the range of 76 cents to 80 cents a share.

Danaher currently carries a Zacks Rank #3 (Hold). Some other stocks in the same sector worth considering include Crane Co. (CR - Snapshot Report), Hutchison Whampoa Ltd. (HUWHY) and Icahn Enterprises, L.P. (IEP). All these stocks carry a Zacks Rank #2 (Buy).

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