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Danaher's (DHR) Q1 Earnings & Revenues Surpass Estimates

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Zacks Equity Research
·5 min read
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Danaher Corporation DHR has reported impressive results for the first quarter of 2021, with earnings surpassing estimates by 50.9%. Also, the company’s sales surpassed the Zacks Consensus Estimate by 0.6%.

Danaher’s adjusted earnings were $2.52 per share, which surpassed the Zacks Consensus Estimate of $1.67. Also, the bottom line increased 140% from the year-ago quarter’s figure of $1.05 mainly on sales growth.

Revenue Details

In the quarter under review, the company’s net sales were $6,858 million, reflecting year-over-year growth of 57.9%. The results were driven by solid segmental performances. Organic sales in the quarter increased 20% and foreign-currency translations had a positive impact of 3.5%. Also, acquisitions/divestments boosted sales by 34.5%.

As noted, Cytiva had a 10% positive contribution to sales growth in the quarter. Organic sales, including the impact of Cytiva, increased 30% year over year. Also, the pandemic-induced demand for products boosted sales by 20%.

Further, the company’s top line surpassed the Zacks Consensus Estimate of $6,819 million.

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

Revenues from Life Sciences totaled $3,546 million, rising 114.9% year over year. Foreign-currency translations boosted sales by 4%. Core sales including the impact of Cytiva grew 41.5% year over year.

Revenues from Diagnostics grossed $2,178 million, increasing 34% year over year. The improvement came on the back of a 31% rise in core sales and a 3% gain from foreign-currency translations.

Revenues from Environmental & Applied Solutions totaled $1,134 million, increasing 6.5% year over year. Core sales expanded 3.5%, while acquisitions and foreign currency translation had positive impacts of 0.5% and 2.5%, respectively.

Margin Profile

In the quarter under review, Danaher’s cost of sales increased 37.1% year over year to $2,605 million. It represented 38% of net sales compared with 43.7% in the year-ago quarter. Gross profit increased 74.1% to $4,253 million, while margin increased 570 basis points (bps) to 62%.

Selling, general and administrative expenses of $1,876 million witnessed a year-over-year increase of 28.7%. As a percentage of net sales, it represented 27.4% versus 33.6% in the year-ago quarter. Research and development expenses were $380 million, which rose 32.4%. It represented 5.5% of net sales versus 6.6% in the year-ago quarter.

Operating income in the quarter increased 186.1% year over year to $1,997 million. Operating margin increased 1300 bps to 29.1%. Interest expenses in the quarter totaled $58 million, higher than $47 million reported in the year-ago quarter.

Balance Sheet and Cash Flow

Exiting the first quarter, Danaher had cash and cash equivalents of $6,330 million, up from $6,035 million at the end of the last reported quarter. Long-term debt balance decreased 4.4% sequentially to $20,267 million. In the first three months of 2021, the company repaid $279 million borrowings, with a maturity of more than 90 days.

In the first three months of 2021, Danaher generated net cash of $1,871 million from operating activities (continuing operations), reflecting a year-over-year increase of 126.5%. Capital used for purchasing property, plant and equipment totaled $251 million versus $133 million in the comparable period of the previous year. Free cash flow in the quarter improved 135% to $1,632 million.

The company paid out dividends worth $169 million to its shareholders in the quarter, reflecting an increase of 22.5% 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 second quarter of 2021, the company expects core revenues, including Cytiva, to grow in the mid-20 percent range. The same is predicted to increase in high-teens percent range 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 & Stocks to Consider

The company currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks are Astec Industries, Inc. ASTE, Dover Corporation DOV and Applied Industrial Technologies, Inc. AIT. While Astec Industries currently sports a Zacks Rank #1 (Strong Buy), Dover and Applied Industrial carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Astec Industries delivered a positive earnings surprise of 172.72%, on average, in the trailing four quarters.

Dover delivered a positive earnings surprise of 21.35%, on average, in the trailing four quarters.

Applied Industrial delivered a positive earnings surprise of 21.92%, on average, in the trailing four quarters.

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