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Danaher (DHR) Beats on Q3 Earnings, Ups 2021 Core Sales View

·5-min read

Danaher Corporation DHR kept its earnings beat streak alive in the third quarter of 2021. It came up with a surprise of 11.68% in the quarter and its sales exceeded estimates by 3.08%.

In the reported quarter, the company’s adjusted earnings were $2.39 per share, surpassing the Zacks Consensus Estimate of $2.14. The bottom line increased 39% from the year-ago quarter’s figure of $1.72, mainly on sales growth and an improved gross margin.

Revenue Details

In the quarter under review, the company’s net sales were $7,229 million, reflecting year-over-year growth of 23%. Results were driven by solid segmental performances. Organic sales in the quarter increased 20.5% and foreign-currency translations left a positive impact of 1.5%. Acquisitions/divestments boosted sales by 1%.

Pandemic-induced demand for products boosted sales by 10.5%. The company’s top line surpassed the Zacks Consensus Estimate of $7,013 million.

It reports net sales under three segments, namely Life Sciences, Diagnostics and Environmental & Applied Solutions. The segmental information is briefly discussed below:

Revenues for the Life Sciences segment totaled $3,632 million, rising 24.5% year over year. Acquisitions/divestments contributed 2.5% to sales growth while foreign-currency translations boosted sales by 2%. Core sales grew 20% year over year.

Revenues in the Diagnostics segment grossed $2,449 million, increasing 29.5% year over year. This improvement came on the back of a 28.5% rise in core sales and a 1% gain from foreign-currency translations.

Revenues in the Environmental & Applied Solutions segment totaled $1,148 million, up 7% year over year. Core sales expanded 7.5% and foreign currency translation had a positive impact of 1.5%. Acquisitions lowered sales by 2%.

Margin Profile

In the quarter under review, Danaher’s cost of sales increased 8% year over year to $2,870 million. It represented 39.7% of net sales compared with 45.2% in the year-ago quarter. Gross profit of $4,359 million grew 35.1% year over year while margin increased 550 basis points (bps) year over year to 60.3%.

Selling, general and administrative expenses of $2,062 million witnessed a year-over-year increase of 14.8%. As a percentage of net sales, it represented 28.5% compared with 30.5% in the year-ago quarter. Research and development expenses were $441 million, which rose 28.9% year over year. It represented 6.1% of net sales compared with 5.8% in the year-ago quarter.

Operating income in the quarter under review increased 20.3% year over year to $1,309 million. The operating margin decreased 40 bps to 18.1% in the quarter. Interest expenses in the quarter totaled $62 million, down 20.5% from the year-ago quarter.

Balance Sheet and Cash Flow

Exiting the third quarter, Danaher had cash and cash equivalents of $2,552 million, down 65.1% from $7,322 million at the end of the last reported quarter. Long-term debt balance increased 15.6% sequentially to $23,591 million.

In the first three quarters of 2021, the company repaid $279 million of borrowings with a maturity of more than 90 days. Proceeds from borrowings (with maturity less than 90 days) totaled $3,496 million in the period.

The company generated net cash of $6,025 million from operating activities (continuing operations) in the first three quarters of 2021, reflecting a year-over-year increase of 51%. Capital used for purchasing property, plant and equipment totaled $874 million compared with $475 million in the year-ago period. Free cash flow (continuing operations) was $5,164 million, mirroring growth of 46.5% from the year-ago period’s level.

It paid out dividends worth $551 million to its shareholders in the first nine months of 2021, up 23.8% from the comparable period’s reading in the previous year.

Outlook

For the fourth quarter of 2021, Danaher expects core revenue growth in low to mid-teens percentage. The same is predicted to increase more than 20% for 2021 compared with high-teens, expected earlier.

Cytiva’s contribution to sales is anticipated in the low-single-digit range for the year. Including Cytiva, core sales are expected to grow more than 20% in 2021.

The COVID-related tailwinds are anticipated to boost sales in mid-to-high-single digits during the fourth quarter and above 10% for the current year.

Danaher Corporation Price, Consensus and EPS Surprise

Danaher Corporation Price, Consensus and EPS Surprise
Danaher Corporation Price, Consensus and EPS Surprise

Danaher Corporation price-consensus-eps-surprise-chart | Danaher Corporation Quote

Zacks Rank & Other Stocks to Consider

With a market capitalization of $224.8 billion, Danaher currently carries a Zacks Rank #2 (Buy).

Three other top-ranked companies in the industry are Raven Industries, Inc. RAVN, Griffon Corporation GFF and LSB Industries, Inc. LXU. While Raven currently sports a Zacks Rank #1 (Strong Buy), both Griffon and LSB Industries presently carry a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, these companies’ bottom-line estimates improved for the current year.


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