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Danaher (DHR) Up 14.9% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Danaher (DHR - Free Report) . Shares have added about 14.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Danaher due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Danaher's Q3 Earnings & Revenues Beat Estimates
Danaher's third-quarter 2023 adjusted earnings (excluding 51 cents from non-recurring items) of $2.02 per share surpassed the Zacks Consensus Estimate of $1.83. However, the bottom line declined 21.1% year over year.
Danaher’s net sales of $6,873 million outperformed the consensus estimate of $6,611.7 million. However, it declined 10.3% year over year due to a decrease in the sale of COVID-related products and weak demand in the Life Sciences segment.
Organic sales in the quarter decreased 11.5%. Foreign-currency translations had a positive impact of 0.5% on quarterly sales. Base business core sales (adjusted) declined 3% in the quarter.
Segmental Discussion
Revenues from the Life Sciences segment totaled $1,706 million, down 1% year over year. Core sales dipped 2.5% year over year. Acquisitions/divestitures led to a 1% increase in sales. Operating profit was $313 million for the quarter, down 11.6% year over year. We expected the Life Sciences segment operating profit to be $309.7 million. 2
Revenues from the Diagnostics segment grossed $2,254 million, down 15.9% year over year. Our estimate for the quarter was $2,230.9 million. The downside was due to a 15.5% decline in core sales. Foreign-currency woes affected sales by 0.5%. Operating profit was $539 million for the quarter, down 29.2% on a year-over-year basis.
Revenues from the Environmental & Applied Solutions segment totaled $1,249 million, up 3.5% year over year. Our estimate for the quarter was $1,226.1 million. Core sales expanded 1%. Acquisitions/divestitures boosted sales by 0.5%. Operating profit was $286 million for the quarter, flat year over year. Our estimate for the quarter was $210 million.
Revenues from the Biotechnology segment totaled $1,664 million, down 19% year over year. Our estimate for the quarter was $1,635.6 million. Core sales dropped 21% for the segment. Operating profit was $417 million for the quarter, down 39.6% year over year. Our estimate for the quarter was $459.4 million.
Margin Profile
In the third quarter, Danaher’s cost of sales decreased 6.7% year over year to $2.87 billion. Gross profit of $4 billion fell 12.7% year over year. Gross margin in the quarter was 58.2% compared with 59.8% in the year-ago quarter.
Selling, general and administrative expenses of $2,145 million were flat on a year-over-year basis. Research and development expenses were $417 million, down nearly 1% year over year.
Danaher’s operating profit in the quarter under review dropped 28.6% year over year to $1,438 million. Operating margin decreased to 20.9% from 26.3% in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the third quarter, Danaher had cash and equivalents of $12,277 million compared with $5,995 million at 2022-end. Long-term debt was $19,513 million at the end of the reported quarter compared with $19,086 million at the end of December 2022.
Danaher generated net cash of $5,545 million from operating activities at the end of the third quarter compared with $5,978 million in the year-ago period. Capital expenditures totaled $981 million in the same period, up 19.2% year over year. Adjusted free cash flow was $4,572 million at the end of the third quarter compared with $5,164 million at the end of the year-ago period.
In the first nine months of 2023, DHR paid out dividends of $621 million, up around 1% on a year-over-year basis.
Outlook
For the fourth quarter of 2023, Danaher expects adjusted base business core revenues from continuing operations to decline in mid-single digits on a year-over-year basis. The same is anticipated to decrease slightly on a year-over-year basis in 2023.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -17.35% due to these changes.
VGM Scores
At this time, Danaher has a poor Growth Score of F, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Danaher has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Danaher (DHR) Up 14.9% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Danaher (DHR - Free Report) . Shares have added about 14.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Danaher due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Danaher's Q3 Earnings & Revenues Beat Estimates
Danaher's third-quarter 2023 adjusted earnings (excluding 51 cents from non-recurring items) of $2.02 per share surpassed the Zacks Consensus Estimate of $1.83. However, the bottom line declined 21.1% year over year.
Danaher’s net sales of $6,873 million outperformed the consensus estimate of $6,611.7 million. However, it declined 10.3% year over year due to a decrease in the sale of COVID-related products and weak demand in the Life Sciences segment.
Organic sales in the quarter decreased 11.5%. Foreign-currency translations had a positive impact of 0.5% on quarterly sales. Base business core sales (adjusted) declined 3% in the quarter.
Segmental Discussion
Revenues from the Life Sciences segment totaled $1,706 million, down 1% year over year. Core sales dipped 2.5% year over year. Acquisitions/divestitures led to a 1% increase in sales. Operating profit was $313 million for the quarter, down 11.6% year over year. We expected the Life Sciences segment operating profit to be $309.7 million. 2
Revenues from the Diagnostics segment grossed $2,254 million, down 15.9% year over year. Our estimate for the quarter was $2,230.9 million. The downside was due to a 15.5% decline in core sales. Foreign-currency woes affected sales by 0.5%. Operating profit was $539 million for the quarter, down 29.2% on a year-over-year basis.
Revenues from the Environmental & Applied Solutions segment totaled $1,249 million, up 3.5% year over year. Our estimate for the quarter was $1,226.1 million. Core sales expanded 1%. Acquisitions/divestitures boosted sales by 0.5%. Operating profit was $286 million for the quarter, flat year over year. Our estimate for the quarter was $210 million.
Revenues from the Biotechnology segment totaled $1,664 million, down 19% year over year. Our estimate for the quarter was $1,635.6 million. Core sales dropped 21% for the segment. Operating profit was $417 million for the quarter, down 39.6% year over year. Our estimate for the quarter was $459.4 million.
Margin Profile
In the third quarter, Danaher’s cost of sales decreased 6.7% year over year to $2.87 billion. Gross profit of $4 billion fell 12.7% year over year. Gross margin in the quarter was 58.2% compared with 59.8% in the year-ago quarter.
Selling, general and administrative expenses of $2,145 million were flat on a year-over-year basis. Research and development expenses were $417 million, down nearly 1% year over year.
Danaher’s operating profit in the quarter under review dropped 28.6% year over year to $1,438 million. Operating margin decreased to 20.9% from 26.3% in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the third quarter, Danaher had cash and equivalents of $12,277 million compared with $5,995 million at 2022-end. Long-term debt was $19,513 million at the end of the reported quarter compared with $19,086 million at the end of December 2022.
Danaher generated net cash of $5,545 million from operating activities at the end of the third quarter compared with $5,978 million in the year-ago period. Capital expenditures totaled $981 million in the same period, up 19.2% year over year. Adjusted free cash flow was $4,572 million at the end of the third quarter compared with $5,164 million at the end of the year-ago period.
In the first nine months of 2023, DHR paid out dividends of $621 million, up around 1% on a year-over-year basis.
Outlook
For the fourth quarter of 2023, Danaher expects adjusted base business core revenues from continuing operations to decline in mid-single digits on a year-over-year basis. The same is anticipated to decrease slightly on a year-over-year basis in 2023.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -17.35% due to these changes.
VGM Scores
At this time, Danaher has a poor Growth Score of F, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Danaher has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.