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Was Danaher Corporation's (NYSE:DHR) Earnings Decline Part Of A Broader Industry Downturn?

Simply Wall St

Understanding Danaher Corporation's (NYSE:DHR) performance as a company requires examining more than earnings from one point in time. Today I will take you through a basic sense check to gain perspective on how Danaher is doing by evaluating its latest earnings with its longer term trend as well as its industry peers' performance over the same period.

View our latest analysis for Danaher

Was DHR's recent earnings decline worse than the long-term trend and the industry?

DHR's trailing twelve-month earnings (from 27 September 2019) of US$2.4b has declined by -12% compared to the previous year.

Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 5.3%, indicating the rate at which DHR is growing has slowed down. What could be happening here? Let's examine what's transpiring with margins and if the rest of the industry is experiencing the hit as well.

NYSE:DHR Income Statement, December 4th 2019

In terms of returns from investment, Danaher has fallen short of achieving a 20% return on equity (ROE), recording 7.5% instead. Furthermore, its return on assets (ROA) of 4.0% is below the US Medical Equipment industry of 7.0%, indicating Danaher's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Danaher’s debt level, has declined over the past 3 years from 7.7% to 6.4%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 13% to 53% over the past 5 years.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors influencing its business. I recommend you continue to research Danaher to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for DHR’s future growth? Take a look at our free research report of analyst consensus for DHR’s outlook.
  2. Financial Health: Are DHR’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

NB: Figures in this article are calculated using data from the trailing twelve months from 27 September 2019. This may not be consistent with full year annual report figures.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.