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Will Cost Headwinds Dampen Danaher's (DHR) Q4 Earnings?

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Danaher Corporation (DHR - Free Report) is scheduled to release fourth-quarter 2022 earnings numbers on Jan 24, before the market open.

The Zacks Consensus Estimate for the company’s fourth-quarter earnings has been revised downward by 7.6% in the past 90 days. However, the company has an impressive earnings surprise history, having outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average beat being 10.9%.

Let’s see how things are shaping up for Danaher this earnings season.

Factors to Note

Strength in food, beverage and consumer end-markets, robust demand for analytical chemistries and consumables and steady activity levels in the municipal and industrial project are likely to have aided Danaher’s Environmental & Applied Solutions segment in the fourth quarter. The Zacks Consensus Estimate for the Environmental & Applied Solutions segment revenues suggests a 0.7% increase from the year-ago reported figure.

However, high raw material costs, logistics problems, high freight costs and supply-chain issues (primarily relating to a shortage of components) are likely to have affected Danaher’s margin performance in the fourth quarter. Given the company’s substantial international presence, foreign currency headwinds are expected to have impacted the top line in the to-be-reported quarter.

The Zacks Consensus Estimate for Danaher’s Life Sciences segment reflects a year-over-year decline of 0.6%. We expect the same to fall 2.3% for the fourth quarter.

Danaher Corporation Price and EPS Surprise

 

Danaher Corporation Price and EPS Surprise

Danaher Corporation price-eps-surprise | Danaher Corporation Quote

 

The Zacks Consensus Estimate for Diagnostics segment revenues shows a 17.8% decline from the year-ago reported number. For the fourth quarter, we expect the same to decrease 14.7% year over year.

What Does the Zacks Model Say?

Our proven model does not conclusively predict an earnings beat for Danaher this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates, which is not the case here, as elaborated below. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: Danaher has an Earnings ESP of -0.05%. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.

Zacks Rank: Danaher currently carries a Zacks Rank #4 (Sell).

Highlights of Q3 Earnings

Danaher’s third-quarter 2022 adjusted earnings (excluding 46 cents from non-recurring items) of $2.56 per share surpassed the Zacks Consensus Estimate of $2.24. The bottom line increased 7.1% from the year-ago quarter primarily on sales growth. Danaher’s net sales of $7,663 million outperformed the Zacks Consensus Estimate of $7,092 million and increased 6% year over year.

Stocks to Consider

Here are some companies which according to our model have the right combination of elements to beat on earnings in this reporting cycle.

IDEX Corporation (IEX - Free Report) has an Earnings ESP of +0.44% and a Zacks Rank of 2. The company is slated to release fourth-quarter 2022 results on Jan 31.

IDEX’s earnings have surpassed the Zacks Consensus Estimate in each of the preceding four quarters, the average beat being 5.7%.

Xylem Inc. (XYL - Free Report) has an Earnings ESP of +1.27% and a Zacks Rank of 2. The company is scheduled to release fourth-quarter 2022 results on Feb 2.

Xylem’s earnings have surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 13.3%.

Illinois Tool Works (ITW - Free Report) has an Earnings ESP of +1.73% and a Zacks Rank of 3. The company is slated to release fourth-quarter 2022 results on Feb 2.

Illinois Tool’s earnings have surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 4.2%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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