Danaher Corporation’s (DHR Quick QuoteDHR - Free Report) second-quarter 2023 adjusted earnings (excluding 56 cents from non-recurring items) of $2.05 per share surpassed the Zacks Consensus Estimate of adjusted earnings of $2.00 per share. The bottom line decreased 25.5% year over year with a decline in sales.

Danaher’s net sales of $7,157 million outperformed the consensus estimate of $7,098 million. However, it declined 7.7% year over year due to a decrease in the sale of COVID-related products.

Organic sales in the quarter decreased 7%. Foreign-currency translations had an adverse impact of 0.5% on quarterly sales. Base business core sales (adjusted) growth was 2% in the quarter.

Segmental Discussion

Revenues from the Life Sciences segment totaled $1,796 million, rising 5.5% year over year. Unfavorable foreign-currency translations lowered sales by 1%. Core sales grew 5.5% year over year. Acquisitions/divestitures led to a 1% increase in sales. Operating profit was $340 million for the quarter, down 2.9% year over year.

Revenues from the Diagnostics segment grossed $2,231 million, down 13% year over year. Our estimate for the quarter was $2,381.8 million. The downside was due to a 11.5% decline in core sales. Foreign-currency woes affected sales by 1.5%. Operating profit was $424 million for the quarter, down 47% year over year.

Revenues from the Environmental & Applied Solutions segment totaled $1,245 million, up 2% year over year. Core sales expanded 1.5%. Acquisitions/divestitures boosted sales by 0.5%. Operating profit was $302 million for the quarter, down 1.6% year over year. Our estimate for the quarter was $263.4 million.

Revenues from the Biotechnology segment totaled $1,885 million, down 17% year over year. Our estimate for the quarter was $1,860.7 million. Unfavorable foreign currency movements reduced sales by 0.5%. Core sales dropped 16.5% for the segment. Operating profit was $480 million for the quarter, down 41.8% year over year. Our estimate for the quarter was $587.5 million.

Margin Profile

In the second quarter, Danaher’s cost of sales increased 2.8% year over year to $3,116 million. Gross profit of $4,041 million fell 14.4% year over year. The margin in the quarter was 56.5%, down 440 basis points year over year.

Selling, general and administrative expenses of $2,194 million witnessed a year-over-year increase of 5.2%. Research and development expenses were $418 million, down 3% year over year.

The operating profit in the quarter under review dropped 35.2% year over year to $1,429 million. Operating margin decreased to 20% from 28.4% in the year-ago quarter.

Balance Sheet and Cash Flow

Exiting the second quarter, Danaher had cash and equivalents of $8,575 million, compared with $5,995 million at 2022-end. Long-term debt was $18,285 million at the end of the reported quarter, compared with $19,086 million at the end of December 2022.

Danaher generated net cash of $3,873 million from operating activities at the end of second-quarter 2023, compared with $3,968 million in the year-ago period. Capital expenditures totaled $616 million in the same period, up 12.8% year over year. Adjusted free cash flow was $3,261 million at the end of the second quarter, compared with $3,431 million at the end of the year-ago period.

DHR paid out dividends worth $422 million to its shareholders in the second quarter, up 2.7% on a year-over-year basis.

Outlook

For the third quarter of 2023, Danaher expects adjusted base business core revenues to decline in low-single digit. The company expects low-single-digit growth in the metric for 2023, compared with mid-single-digit growth expected earlier. Organic sales are estimated to decrease in low-teen-digits or mid-teen-digits in the third quarter. For the full year, DHR expects organic sales to decline in high-single-digit or low-double-digit, compared with high-single-digit growth stated earlier.

Zacks Rank & Stocks to Consider

DHR currently carries Zacks Rank #4 (Sell). Some better-ranked companies are discussed below:

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