Danaher shares are under pressure Wednesday because the Club holding’s fourth-quarter earnings results got here in mixed and guidance disillusioned. The corporate long known for its operational excellence is further testing our patience. Revenue for the three months ended Dec. 31 advanced 2% yr over yr on a reported basis, to $6.54 billion, outpacing the LSEG consensus estimate of $6.43 billion. On an organic basis, sales were up 1% versus the year-ago period. Adjusted earnings per share (EPS) increased 2.4% annually, to $2.14, nevertheless it got here up short versus the $2.16 consensus estimate, LSEG data showed. It’s the primary time Danaher has missed the quarterly EPS consensus since not less than the fourth quarter of 2019, in keeping with FactSet. Shares tumbled greater than 8%, to roughly $226 apiece, in early afternoon trading Wednesday. The losses have dragged the stock into negative territory yr so far. Danaher entered the session up roughly 8% to date in 2025, a part of a powerful begin to the yr for the health-care sector more broadly. DHR 1Y mountain Danaher’s stock performance over the past 12 months. Bottom line Yet one more disappointing release from Danaher — extending a streak of inconsistent results over the past two years — leaves us with no selection but to reconsider this position. On Tuesday, we did trim 50 shares and downgraded the name to a hold-equivalent 2 rating out of discipline. It got here because the stock got a lift on the back of results from European peer Sartorius. After all, in hindsight, we should always have sold more. That is difficult to confess due to how highly we have considered this company and its management up to now. And it isn’t just us: Danaher’s long-standing corporate technique to fuel growth and make shareholders money —the aptly named Danaher Business System — has been the topic of Harvard Business School case studies . Danaher provides services to multiple corners of the health-care industry, including those utilized in drug discovery and production, in addition to diagnostic tools present in hospitals and doctors’ offices. Its customers also include academic research labs and pharmaceutical and biotech firms. We didn’t arrive at our dissatisfaction in haste. Through the January Monthly Meeting, we highlighted our disappointment in the shortage of growth out of China. While the sluggish Chinese economy can’t be blamed on management, the failure to administer investor expectations can. Compounding our existing frustration, management sounded so upbeat Wednesday despite what we see within the actual results and formal guidance. The team’s credibility is back unsure. For now, we’re lowering our price goal on the stock to $270 a share from $305, reflecting the lower-than-expected growth now forecast for 2025. Indeed, the true driver of disappointment Wednesday is Danaher’s outlook for the present quarter and full fiscal yr. Management had previewed these decidedly mixed fourth-quarter results earlier this month, on the influential JPMorgan Healthcare Conference, which added to the anticipation of Wednesday’s guide. What we got wasn’t ok, with expected core revenue growth for each periods below Wall Street’s consensus. Danaher Why we own it: Danaher is a best-in-class life sciences and diagnostics company tied to secular growth trends like an aging global population, a shift in medicine to biologics, and the rise of monoclonal antibodies, amongst other themes. Lately, Danaher has reshaped its portfolio toward faster-growing, higher-margin opportunities inside health care. However it has been a bumpy ride, with Danaher struggling to return to sustainable growth as a consequence of customers working off excess Covid-era inventory. Our investment acknowledges continued near-term headwinds with long run potential. Competitors : Sartorius and Thermo Fisher Scientific Weight in portfolio : 3.27% Most up-to-date buy : Nov. 18, 2024 Initiated : Jan. 3, 2022 Among the many few shiny spots within the fourth quarter: Free money flow got here in at $1.5 billion, representing nearly 30% growth versus the year-ago period. The corporate also achieved a free money flow to net income conversion ratio of 138%. For the complete yr, that ratio got here in at 136%. Anything above 100% signifies that an organization’s earnings are fully backed by money, an indication of high-quality profits. Danaher cleared that bar — after which some. Moreover, in the course of the fourth quarter and into January, Danaher repurchased about 8 million shares, totaling about $1.9 billion. Quarterly commentary Danaher’s sales in developed markets got here in roughly flat within the quarter, as a low-single-digit decline in North America was offset by a low-single-digit increase in Western Europe. High-growth markets were up low single digits as momentum outside of China greater than offset a mid-single-digit decline in China. Biotechnology core revenue was up 8% yr over yr, with orders increasing high-single-digit percentage points on a sequential basis. Basically, core revenue strips out the impact of foreign-exchange fluctuations, in addition to as mergers and acquisitions. It helps smooth out the year-over-year comparisons and higher capture how the segment is performing. The biotechnology segment’s book-to-bill was about 1. Anything above 1 indicates more orders were received than filled in a given period. The segment’s adjusted operating profit margin was 38.6%, up 200 basis points yr over yr. A basis point is the same as 0.01%. Bioprocessing sales were up high-single-digit percentage points, with the gradual recovery seen all year long continuing into the fourth quarter. In the important thing China market, management said “activity levels were relatively stable,” but overall they continue to be weak as a consequence of a difficult funding environment. Life sciences core revenue was up 1% yr over yr. The segment’s adjusted operating profit margin expanded 320 basis points yr over yr, to 25.8% Instruments sales increased barely, outpacing management’s expectations within the U.S. and Europe. In China, CEO Rainer Blair said Danaher observed “modest demand improvements” in the course of the quarter. “While we did see a modest profit from the continuing stimulus program, market conditions proceed to be difficult as customers remain cautious with their investments,” he said. Diagnostics core revenue declined 2% yr over yr. The segment’s adjusted operating profit margin contracted 170 basis points versus the year-ago period, to 29.2% Clinical diagnostics businesses realized combined core revenue growth within the low-single-digit range, led by Leica Biosystems, where sales were up nearly 10% yr over yr. Cepheid respiratory sales got here in $550 million, well ahead of the roughly $350 million expected by management, as a consequence of each increased volumes and a positive sales mixture of Danaher’s four-in-one test for Covid-19, Flu A, Flu B, and respiratory syncytial virus, or RSV. Guidance For the present quarter, Danaher expects core revenue to say no within the low single digits versus last yr, missing expectations of a 2.9% increase, in keeping with estimates compiled by FactSet. Danaher’s adjusted operating profit margin is predicted to be roughly 26.5%, below the 30% the Street was on the lookout for. Biotechnology core revenue is predicted to extend 6% to 7% Meanwhile, core revenue for each the life sciences and diagnostics segments is predicted to be down mid-single-digit percentage points. For the complete yr, management forecasts 3% core revenue growth, also a miss versus expectations for a roughly 5% increase, in keeping with FactSet. The adjusted operating profit margin is predicted to be roughly 28.5%, below the Wall Street consensus of 29.7%. Biotechnology core revenue growth is predicted to be between 6% and seven%, a miss versus analyst expectations for an 8% yr over yr increase, per FactSet. Life sciences core revenue growth is projected to be up low-single-digit percentage points. That compares to the Wall Street consensus of 4% annual growth. Diagnostics core revenue growth is predicted to be within the range of flat to up low-single-digit percentage points. That compares to a mid-single-digit annual growth estimate. (Jim Cramer’s Charitable Trust is long DHR. 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A employee uses a machine made by Pall Corp. during an indication of the clarification stage of the production of influenza vaccine during a tour at a Sanofi Pasteur vaccine production facility in Swiftwater, Pennsylvania.
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Danaher shares are under pressure Wednesday because the Club holding’s fourth-quarter earnings results got here in mixed and guidance disillusioned. The corporate long known for its operational excellence is further testing our patience.
