Danaher Corporation (DHR - Free Report) has reported better-than-expected results for the first quarter of 2020, with earnings surpassing estimates by 5%.
The company’s adjusted earnings were $1.05 per share in the reported quarter, which outpaced the Zacks Consensus Estimate of $1.00. The same also grew 6.1% from the year-ago quarter’s figure of 99 cents on sales growth.
Revenue Details
In the quarter under review, the company’s net sales were $4,343.1 million, which grew 2.9% from the year-ago quarter. Organic sales in the quarter grew 4.5%, partially offset by 1.5% adverse impact of foreign-currency translations. Notably, the organic performance was boosted by healthy growth in Radiometer, Cepheid, Pall and ChemTreat businesses.
However, the company’s top line lagged the Zacks Consensus Estimate of $4,382 million.
Effective third-quarter 2019, it started reporting net sales under three segments — Life Sciences, Diagnostics, and Environmental & Applied Solutions. The segmental information is briefly discussed below:
Revenues for the Life Sciences segment totaled $1,650.4 million, rising 1.5% year over year. Results were driven by 2.5% growth in core sales, partially offset by a 1% adverse impact of foreign-currency translations.
Revenues in the Diagnostics segment grossed $1,627 million, increasing 6% year over year. The improvement came on the back of an 8% rise in core sales, which was partially offset by a 2% negative impact of foreign-currency translations.
Revenues in the Environmental & Applied Solutions segment totaled $1,065.7 million, rising 1% year over year. The uptick can be attributed to 2.5% growth in core sales. However, foreign-currency translations had an adverse impact of 1.5%.
Margin Profile
In the quarter under review, Danaher’s cost of sales rose 1.9% year over year to $1,900.3 million. It represented 43.8% of net sales compared with 44.2% in the year-ago quarter. Gross profit increased by 3.7% year over year to $2,442.8 million, while margin rose 40 basis points (bps) year over year to 56.3%.
Selling, general and administrative expenses of $1,458.3 million reflect a year-over-year increase of 6.6%. As a percentage of net sales, it represented 33.6% versus 32.4% in the year-ago quarter. Research and development expenses were $287 million, which rose 7.3% year over year. It represented 6.6% of net sales versus 6.3% in the year-ago quarter.
Operating income in the quarter under review declined 3.1% year over year to $697.5 million. Operating margin decreased 100 bps to 16.1% in the quarter. The results were adversely impacted by a 5-bps adverse impact of acquisitions and 120-bps impact of miscellaneous sources, partially offset by 25-bps contribution from the core business.
Interest expenses more than doubled year over year to $47.4 million.
Balance Sheet and Cash Flow
Exiting the first quarter, Danaher had cash and cash equivalents of $4,367.7 million, down from $19,912.3 million at the end of the last reported quarter. Long-term debt balance rose 5.7% sequentially to $22,737.2 million.
During the quarter, the company raised $4,371.4 million through borrowings, with maturity of more than 90 days.
In the quarter, it generated net cash of $819 million from operating activities, increasing 16.5% from the previous-year quarter. Capital used for purchasing property, plant and equipment totaled $132.5 million versus $140.1 million in the previous year.
Free cash flow in the quarter improved 21% year over year to $694 million.
Shareholder-Friendly Policy
In the quarter, the company paid out dividends worth $138.1 million to its shareholders.
A day before the earnings release, it noted that its board of directors approved the payment of a quarterly cash dividend of 18 cents per share to shareholders of record as of Jun 26. The payment will be made on Jul 31.
Event Worth Mentioning
During first-quarter 2020, Danaher completed the acquisition of General Electric Company’s (GE - Free Report) BioPharma business. The acquired BioPharma business will be included in Danaher’s Life Sciences segment. It will be called Cytiva and work as an operating company (stand-alone).
As noted, the BioPharma business originally belonged to General Electric’s GE Life Sciences business under the ambit of the Healthcare segment. The BioPharma business comprises single-use technologies, process chromatography hardware and related consumables, development instrumentation and related consumables, and cell culture media and service.
Danaher used cash on hand, proceeds from shares and preferred stock issuances, and funds raised through debts and credit facilities to pay $21 billion for the buyout. The company also assumed certain pension liabilities of General Electric. The total transaction value for the buyout was $21.4 billion.
Outlook
In the quarters ahead, Danaher expects to benefit from solid product portfolio, operational efficiency and dedicated workforce.
For the second quarter of 2020, the company expects core revenues to be down 10% to flat year over year. The projection includes positive contribution of 2% from Cytiva.
Danaher Corporation Price, Consensus and EPS Surprise
Zacks Names "Single Best Pick to Double"
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Danaher Corporation (DHR - Free Report) has reported better-than-expected results for the first quarter of 2020, with earnings surpassing estimates by 5%.
The company’s adjusted earnings were $1.05 per share in the reported quarter, which outpaced the Zacks Consensus Estimate of $1.00. The same also grew 6.1% from the year-ago quarter’s figure of 99 cents on sales growth.
Revenue Details
In the quarter under review, the company’s net sales were $4,343.1 million, which grew 2.9% from the year-ago quarter. Organic sales in the quarter grew 4.5%, partially offset by 1.5% adverse impact of foreign-currency translations. Notably, the organic performance was boosted by healthy growth in Radiometer, Cepheid, Pall and ChemTreat businesses.
However, the company’s top line lagged the Zacks Consensus Estimate of $4,382 million.
Effective third-quarter 2019, it started reporting net sales under three segments — Life Sciences, Diagnostics, and Environmental & Applied Solutions. The segmental information is briefly discussed below:
Revenues for the Life Sciences segment totaled $1,650.4 million, rising 1.5% year over year. Results were driven by 2.5% growth in core sales, partially offset by a 1% adverse impact of foreign-currency translations.
Revenues in the Diagnostics segment grossed $1,627 million, increasing 6% year over year. The improvement came on the back of an 8% rise in core sales, which was partially offset by a 2% negative impact of foreign-currency translations.
Revenues in the Environmental & Applied Solutions segment totaled $1,065.7 million, rising 1% year over year. The uptick can be attributed to 2.5% growth in core sales. However, foreign-currency translations had an adverse impact of 1.5%.
Margin Profile
In the quarter under review, Danaher’s cost of sales rose 1.9% year over year to $1,900.3 million. It represented 43.8% of net sales compared with 44.2% in the year-ago quarter. Gross profit increased by 3.7% year over year to $2,442.8 million, while margin rose 40 basis points (bps) year over year to 56.3%.
Selling, general and administrative expenses of $1,458.3 million reflect a year-over-year increase of 6.6%. As a percentage of net sales, it represented 33.6% versus 32.4% in the year-ago quarter. Research and development expenses were $287 million, which rose 7.3% year over year. It represented 6.6% of net sales versus 6.3% in the year-ago quarter.
Operating income in the quarter under review declined 3.1% year over year to $697.5 million. Operating margin decreased 100 bps to 16.1% in the quarter. The results were adversely impacted by a 5-bps adverse impact of acquisitions and 120-bps impact of miscellaneous sources, partially offset by 25-bps contribution from the core business.
Interest expenses more than doubled year over year to $47.4 million.
Balance Sheet and Cash Flow
Exiting the first quarter, Danaher had cash and cash equivalents of $4,367.7 million, down from $19,912.3 million at the end of the last reported quarter. Long-term debt balance rose 5.7% sequentially to $22,737.2 million.
During the quarter, the company raised $4,371.4 million through borrowings, with maturity of more than 90 days.
In the quarter, it generated net cash of $819 million from operating activities, increasing 16.5% from the previous-year quarter. Capital used for purchasing property, plant and equipment totaled $132.5 million versus $140.1 million in the previous year.
Free cash flow in the quarter improved 21% year over year to $694 million.
Shareholder-Friendly Policy
In the quarter, the company paid out dividends worth $138.1 million to its shareholders.
A day before the earnings release, it noted that its board of directors approved the payment of a quarterly cash dividend of 18 cents per share to shareholders of record as of Jun 26. The payment will be made on Jul 31.
Event Worth Mentioning
During first-quarter 2020, Danaher completed the acquisition of General Electric Company’s (GE - Free Report) BioPharma business. The acquired BioPharma business will be included in Danaher’s Life Sciences segment. It will be called Cytiva and work as an operating company (stand-alone).
As noted, the BioPharma business originally belonged to General Electric’s GE Life Sciences business under the ambit of the Healthcare segment. The BioPharma business comprises single-use technologies, process chromatography hardware and related consumables, development instrumentation and related consumables, and cell culture media and service.
Danaher used cash on hand, proceeds from shares and preferred stock issuances, and funds raised through debts and credit facilities to pay $21 billion for the buyout. The company also assumed certain pension liabilities of General Electric. The total transaction value for the buyout was $21.4 billion.
Outlook
In the quarters ahead, Danaher expects to benefit from solid product portfolio, operational efficiency and dedicated workforce.
For the second quarter of 2020, the company expects core revenues to be down 10% to flat year over year. The projection includes positive contribution of 2% from Cytiva.
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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