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Danaher (DHR) Q4 Earnings Beat Estimates, Sales View Solid

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Zacks Equity Research
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Danaher Corporation DHR has reported impressive results for the fourth quarter of 2020, with earnings surpassing estimates by 13%. Also, the company’s sales surpassed the consensus estimate by 0.1%.

Danaher’s adjusted earnings were $2.08 per share in the reported quarter, which surpassed the Zacks Consensus Estimate of $1.84. Also, the bottom line increased 62.5% from the year-ago quarter’s figure of $1.28 mainly on sales growth and improved operating margin.

In 2020, the company’s adjusted earnings were $6.31 per share, reflecting growth of 42.8% from the previous year. Also, the bottom line surpassed the Zacks Consensus Estimate of $6.06.

Revenue Details

In the quarter under review, the company’s net sales were $6,760 million, reflecting year-over-year growth of 38.9%. The results were driven by solid segmental performances. Organic sales in the quarter increased 12% and foreign-currency translations had a positive impact of 2.5%. Also, acquisitions/divestments boosted sales by 24.5%.

As noted, Cytiva had a 3.5% positive contribution on sales growth in the quarter. Organic sales, including the impact of Cytiva, increased 15.5% year over year. Also, the pandemic-induced demand for products boosted sales by 12%.

Also, the company’s top line surpassed the Zacks Consensus Estimate of $6,753 million.

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

Revenues for the Life Sciences segment totaled $3,361 million, rising 75.5% year over year. Acquisitions/divestments had a positive contribution of 62% to sales growth, while foreign-currency translations boosted sales by 3%. Core sales grew 10.5% year over year.

Cytiva had a positive impact of 8% and including this, organic sales in the quarter increased 18.5% year over year.

Revenues in the Diagnostics segment grossed $2,227 million, increasing 23.5% year over year. The improvement came on the back of a 21.5% rise in core sales and a 2% gain from foreign-currency translations.

Revenues in the Environmental & Applied Solutions segment totaled $1,172 million, increasing 2% year over year. Core sales expanded 1%, while acquisitions and foreign currency translation had positive impacts of 0.5% and 0.5%, respectively.

For 2020, the company’s net sales totaled $22.28 billion, reflecting growth from The Zacks Consensus Estimate of $21.95 billion. Also, the results increased 24.4% on a year-over-year basis.

Margin Profile

In the quarter under review, Danaher’s cost of sales increased 29.7% year over year to $2,806 million. It represented 41.5% of net sales compared with 44.5% in the year-ago quarter. Gross profit increased 46.2% year over year to $3,954 million, while margin increased 290 basis points (bps) year over year to 58.5%.

Selling, general and administrative expenses of $1,957 million witnessed a year-over-year increase of 35.1%. As a percentage of net sales, it represented 29% versus 29.8% in the year-ago quarter. Research and development expenses were $396 million, which rose 34.7% year over year. It represented 5.9% of net sales versus 6% in the year-ago quarter.

Operating income in the quarter under review increased 66.6% year over year to $1,601 million. Operating margin increased 390 bps to 23.7% in the quarter. Interest expenses in the quarter totaled $72 million, higher than $44 million reported in the year-ago quarter.

Balance Sheet and Cash Flow

Exiting the fourth quarter, Danaher had cash and cash equivalents of $6,035 million, up 6.1% from $5,687.7 million at the end of the last reported quarter. Long-term debt balance decreased 2.8% sequentially to $21,193 million.

In 2020, the company raised $8,670 million through borrowings, with a maturity of more than 90 days. It also repaid $5,933 million borrowings, with a maturity of more than 90 days.

In 2020, the company generated net cash of $6,215 million from operating activities (continuing operations), reflecting a year-over-year increase of 69.9%. Capital used for purchasing property, plant and equipment totaled $791 million versus $636 million in the previous year. Free cash flow in the year improved 79% year over year to $5,426 million.

The company paid out dividends worth $615 million to its shareholders in 2020, reflecting an increase of 16.7% from the previous year.

Outlook

In the quarters ahead, Danaher expects to benefit from a solid product portfolio, dedicated workforce and a strong balance sheet.

For the first quarter of 2021, the company expects core revenues, including Cytiva, to grow in mid- to high-teens. The same is predicted to increase in low-double digits in 2021, whereas it recorded 9.5% in 2020.

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 & Upcoming Releases

With a market capitalization of $169.2 billion, Danaher currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Three companies from the industry due to release fourth-quarter results are Honeywell International Inc. HON, Carlisle Companies Incorporated CSL and ITT Inc. ITT. While Honeywell will release results on Jan 29, 2021, Carlisle will report on Feb 4 and ITT on Feb 19.

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