Danaher shares declined Tuesday despite the life sciences company returning its key bioprocessing business to growth within the third quarter. Danaher’s revenue for the three months ended Sept. 27 advanced 3% 12 months over 12 months on a reported basis, to $5.8 billion, outpacing the LSEG consensus estimate of $5.59 billion. On an organic basis, sales were up 0.5%. Adjusted earnings per share decreased 0.6% annually to $1.71 but still topped the $1.57 per share that had been expected. DHR YTD mountain Danaher YTD The stock dropped 4% as investors questioned the sustainability and magnitude of bioprocessing improvements in 2025. Wall Street’s response doesn’t reflect the strides Danaher made in that necessary end-market, which is contained in the corporate’s biotechnology segment. A few of Tuesday’s weakness may be attributed to profit-taking since Danaher shares jumped on last week’s solid results from German life sciences peer Sartorius. Bioprocessing is using cell components to make a wide range of products including targeted therapies. Danaher is a frontrunner in services and products that support health- care research and development. Bottom line Danaher’s stock move lower presents a buying opportunity, and we’re upgrading it to our buy-equivalent 1 rating and increasing our price goal to $305 per share from $295. With the long-running destocking headwind abating, demand from larger bioprocessing customers improved. Bioprocessing in China, nonetheless, remained suppressed. Management said a recovery there may take “more time to play out” within the near term. Along with better-than-expected biotechnology sales, Danaher’s life sciences and diagnostics segments were also strong. Danaher Why we own it : Danaher is a best-in-class life sciences and diagnostics company, with a management team who’ve proven repeatedly their ability to seek out recent ways to grow. We expect to see a turn in bioprocessing-related orders this 12 months as biotech funding comes back online and bigger customers wind down efforts to flush out excess Covid-era inventory. Competitors : Sartorius and Thermo Fisher Scientific Weight in portfolio : 4.6% Most up-to-date buy : July 2, 2024 Initiated : Jan. 3, 2022 Free money flow was higher than expected at $1.23 billion, representing nearly 12% growth versus the year-ago period. The corporate also achieved a free money flow to net income conversion ratio of 150%. Yr so far, that ratio stands at 135%. Meaning its earnings are fully backed by money, after which some, and are higher quality than profits without an equal or greater amount of money in hand. Through the third quarter, management repurchased about 2.6 million shares. Commentary Biotechnology segment sales in Q3 dipped 0.7% on a core basis to $1.65 billion but exceeded estimates. Bioprocessing realized low-single-digit growth within the quarter. Bioprocessing has been under pressure in recent quarters because of a scarcity of funding for smaller businesses after the collapse of Silicon Valley Bank in early 2023 and destocking from larger customers coming out of the Covid pandemic. On the post-earnings call, Danaher CEO Rainer Blair said, “We’re not seeing the identical level of [large customer] improvement in underlying performance from our smaller customers. Despite a modest improvement within the [biotech] funding environment, they proceed to rationalize their therapeutic programs and remain cautious with their investments.” Life sciences segment sales were higher than expected but still dipped 2% on a core basis to $1.78 billion. China remained a headwind, with Blair saying on the decision that “announced stimulus measures in China haven’t yet translated into meaningful order activity as customers are still awaiting details on the implementation of those programs.” Outside of China, demand continues to be somewhat muted but expected to enhance. Diagnostics segment sales advanced 5% on a core basis to $2.36 billion and beat estimates. At subsidiary Cepheid, which handles molecular diagnostics, the team highlighted “broad-based strength” in each the respiratory and non-respiratory parts of the business. Respiratory revenue of $425 million greater than doubled management’s expectations because of higher volumes and a good mixture of its 4-in-1 test for Covid-19, Flu A, Flu B, and respiratory syncytial virus (RSV). Guidance For the current quarter, the fourth of fiscal 2024, Danaher expects a revenue decline within the low single digits versus last 12 months, on a core basis. That is a miss. Expectations were for a rise of two.6%, in response to FactSet. For the total 12 months, management’s forecast was unchanged. The team expects total sales to say no by low single digits in comparison with expectations for a decline of 0.5%. (Jim Cramer’s Charitable Trust is long DHR. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you’ll receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked a couple of stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. 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On this photo illustration, a Danaher Corporation logo seen displayed on a tablet.Â
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Danaher shares declined Tuesday despite the life sciences company returning its key bioprocessing business to growth within the third quarter.
