Subscribe to Entrepreneur for $5
Subscribe

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

Danaher's (DHR) Q3 results reflect healthy demand for products in its three segments and a better gross margin. Pandemic-induced demand too adds to sales growth. It raises the core sales...

By
This story originally appeared on Zacks

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.

- Zacks

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-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.



Zacks Names "Single Best Pick to Double"

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

You know this company from its past glory days, but few would expect that it's poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks' Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.

Free: See Our Top Stock and 4 Runners Up >>



Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

 

Danaher Corporation (DHR): Free Stock Analysis Report

 

Raven Industries, Inc. (RAVN): Free Stock Analysis Report

 

Lsb Industries Inc. (LXU): Free Stock Analysis Report

 

Griffon Corporation (GFF): Free Stock Analysis Report

 

To read this article on Zacks.com click here.

 

Zacks Investment Research