Danaher Corporation (DHR - Free Report) reported better-than-expected bottom-line results for the third quarter of 2018, delivering a positive earnings surprise of 2.8%. This is the company’s 11th consecutive quarter of impressive results.
The company’s adjusted earnings in the reported quarter were $1.10 per share, surpassing the Zacks Consensus Estimate of $1.07. Moreover, the bottom line increased 10% from the year-ago quarter’s tally of $1.00. The upside can be primarily attributed to sales growth and improved operating income.
Organic Sales and Buyouts Drive Revenues
In the quarter under review, Danaher’s net sales were $4,853.1 million, up 7.2% from the year-ago quarter’s figure. Organic sales in the quarter grew 6.5% and acquired assets had a positive 2% impact. However, foreign currency translations had a negative impact of 1.5%.
Also, the top line surpassed the Zacks Consensus Estimate of $4,811 million by 0.9%.
The company reports its net sales in four segments — Life Sciences, Diagnostics, Dental and Environmental & Applied Solutions. The segmental information is briefly discussed below:
Revenues in the Life Sciences segment were $1,596.7 million, increasing 14.5% year over year. Results were driven by 6.5% gain from acquired assets and 9.5% growth in core sales, partially offset by 1.5% adverse impact from foreign currency translations.
Revenues in Diagnostics totaled $1,502.5 million, increasing 3.5% year over year. The improvement came on the back of 5.5% increase in core sales, which was partially offset by 2% negative impact from foreign currency translations.
Revenues in the Dental segment totaled 679.5 million, reflecting year-over-year decline of 2%. Core sales declined 0.5% and foreign currency translations had 1.5% negative impact.
It’s worth mentioning here that Danaher intends to spin-off its Dental business segment into an independent publicly-trading company — DentalCo — by second-half 2019.
Revenues from Environmental & Applied Solutions totaled $1,074.4 million, increasing 8% year over year. The improvement came on the back of 8% increase in core sales and 1.5% positive impact from acquired assets. However, foreign currency translations had an adverse 1.5% impact.
Mixed Margin Profile
In the quarter under review, Danaher’s cost of sales increased 8.6% year over year to $2,162.6 million. It represented 44.6% of net sales compared with 44% in the year-ago quarter. Gross margin in the quarter declined 60 basis points (bps) year over year to 55.4%.
Selling, general and administrative expenses increased 4% year over year to $1,558.6 million. It represented 32.1% of net sales. Research and development expenses were $301.2 million, up 7.9% year over year. It represented 6.2% of net sales.
Operating income in the quarter under review increased 9.4% year over year to $830.7 million. Operating margin grew 30 bps year over year to 17.1%. The margin improvement includes 50 bps contribution from core business and 20 bps adverse impacts from acquisitions.
Balance Sheet and Cash Flow
Exiting the third quarter, Danaher had cash and cash equivalents of $776.2 million, down roughly 14.1% from $904 million at the end of the last reported quarter. Long-term debt balance declined 5.3% sequentially to $10,558 million.
In the first nine months of 2018, the company generated net cash of $2,787.4 million from operating activities, up 5.5% from the year-ago period’s level. Capital used for purchasing property, plant and equipment totaled $441.3 million, down 1% from the year-ago period. Free cash flow grew 5.2% year over year to $2,344.7 million.
Danaher paid dividends worth $321.2 million to shareholders in the first nine months of 2018.
Outlook
In the quarters ahead, Danaher anticipates to continue realizing gains from Danaher Business System (DBS) initiatives. These efforts have enabled the company to focus more on product innovation, superior product quality, building efficient workforce and enhancing shareholder value.
For the third quarter of 2018, Danaher anticipates adjusted earnings in the range of $1.25-$1.28 per share.
For the full year, the company raised adjusted earnings per share projection to $4.49-$4.52 from the previous forecast of $4.43-$4.50.
Danaher Corporation Price, Consensus and EPS Surprise
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Danaher Corporation (DHR - Free Report) reported better-than-expected bottom-line results for the third quarter of 2018, delivering a positive earnings surprise of 2.8%. This is the company’s 11th consecutive quarter of impressive results.
The company’s adjusted earnings in the reported quarter were $1.10 per share, surpassing the Zacks Consensus Estimate of $1.07. Moreover, the bottom line increased 10% from the year-ago quarter’s tally of $1.00. The upside can be primarily attributed to sales growth and improved operating income.
Organic Sales and Buyouts Drive Revenues
In the quarter under review, Danaher’s net sales were $4,853.1 million, up 7.2% from the year-ago quarter’s figure. Organic sales in the quarter grew 6.5% and acquired assets had a positive 2% impact. However, foreign currency translations had a negative impact of 1.5%.
Also, the top line surpassed the Zacks Consensus Estimate of $4,811 million by 0.9%.
The company reports its net sales in four segments — Life Sciences, Diagnostics, Dental and Environmental & Applied Solutions. The segmental information is briefly discussed below:
Revenues in the Life Sciences segment were $1,596.7 million, increasing 14.5% year over year. Results were driven by 6.5% gain from acquired assets and 9.5% growth in core sales, partially offset by 1.5% adverse impact from foreign currency translations.
Revenues in Diagnostics totaled $1,502.5 million, increasing 3.5% year over year. The improvement came on the back of 5.5% increase in core sales, which was partially offset by 2% negative impact from foreign currency translations.
Revenues in the Dental segment totaled 679.5 million, reflecting year-over-year decline of 2%. Core sales declined 0.5% and foreign currency translations had 1.5% negative impact.
It’s worth mentioning here that Danaher intends to spin-off its Dental business segment into an independent publicly-trading company — DentalCo — by second-half 2019.
Revenues from Environmental & Applied Solutions totaled $1,074.4 million, increasing 8% year over year. The improvement came on the back of 8% increase in core sales and 1.5% positive impact from acquired assets. However, foreign currency translations had an adverse 1.5% impact.
Mixed Margin Profile
In the quarter under review, Danaher’s cost of sales increased 8.6% year over year to $2,162.6 million. It represented 44.6% of net sales compared with 44% in the year-ago quarter. Gross margin in the quarter declined 60 basis points (bps) year over year to 55.4%.
Selling, general and administrative expenses increased 4% year over year to $1,558.6 million. It represented 32.1% of net sales. Research and development expenses were $301.2 million, up 7.9% year over year. It represented 6.2% of net sales.
Operating income in the quarter under review increased 9.4% year over year to $830.7 million. Operating margin grew 30 bps year over year to 17.1%. The margin improvement includes 50 bps contribution from core business and 20 bps adverse impacts from acquisitions.
Balance Sheet and Cash Flow
Exiting the third quarter, Danaher had cash and cash equivalents of $776.2 million, down roughly 14.1% from $904 million at the end of the last reported quarter. Long-term debt balance declined 5.3% sequentially to $10,558 million.
In the first nine months of 2018, the company generated net cash of $2,787.4 million from operating activities, up 5.5% from the year-ago period’s level. Capital used for purchasing property, plant and equipment totaled $441.3 million, down 1% from the year-ago period. Free cash flow grew 5.2% year over year to $2,344.7 million.
Danaher paid dividends worth $321.2 million to shareholders in the first nine months of 2018.
Outlook
In the quarters ahead, Danaher anticipates to continue realizing gains from Danaher Business System (DBS) initiatives. These efforts have enabled the company to focus more on product innovation, superior product quality, building efficient workforce and enhancing shareholder value.
For the third quarter of 2018, Danaher anticipates adjusted earnings in the range of $1.25-$1.28 per share.
For the full year, the company raised adjusted earnings per share projection to $4.49-$4.52 from the previous forecast of $4.43-$4.50.
Danaher Corporation Price, Consensus and EPS Surprise
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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