Will Low COVID-Testing Volumes Mar Danaher's (DHR) Q2 Earnings?
Danaher Corporation DHR is scheduled to release second-quarter 2023 results on Jul 25, before market open.
The Zacks Consensus Estimate for the company’s second-quarter earnings has been revised downward by 2.4% in the past 60 days. However, the company has a stellar earnings surprise history, having outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average beat being 13.2%.
Let’s take a look at the factors that are likely to have influenced Danaher’s second-quarter performance.
Danaher Corporation Price and EPS Surprise
Danaher Corporation price-eps-surprise | Danaher Corporation Quote
Danaher’s second-quarter performance is expected to have been hurt by decrease in the sale of COVID-related products. Diagnostics segment revenues are expected to reflect year-over-year decline in revenues due to lower COVID-related respiratory testing volumes. The Zacks Consensus Estimate for Diagnostics segment revenues indicates a 16.5% decrease from the year-ago reported number. We expect Diagnostics segment revenues to decline 7% from the year-ago reported number.
Due to lower demand for COVID-19 testing, vaccine and therapeutics, Danaher expects total core revenues to decline in the high single digits for the second quarter. The Zacks Consensus Estimate for second-quarter revenues suggests an 8.4% decrease from the year-ago reported number. We expect the company’s total revenues to fall 8.7% from the year-ago reported figure.
Escalating cost of sales due to inflationary pressure is expected to have hurt Danaher’s bottom line in the to-be-reported quarter. The Zacks Consensus Estimate for DHR’s second-quarter earnings hints at a 27.2% drop from the year-ago reported number. We expect the company’s second-quarter earnings to decline approximately 28% from the second quarter 2022 reported figure. Given the company’s substantial international presence, foreign currency headwinds are likely to have affected its top line.
However, improving supply chains and strength across the Life Sciences segment due to strong demand for advanced solutions and growth in the genomics consumables business is expected to have aided Danaher’s second-quarter performance.
Disciplined cost management, productivity initiatives and pricing actions are expected to have supported Danaher’s margins in the to-be-reported quarter.
What Does the Zacks Model Say?
Our proven model does not conclusively predict an earnings beat for Danaher this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates, which is not the case here, as elaborated below.
Earnings ESP: Danaher has an Earnings ESP of -1.00% as the Most Accurate Estimate is pegged at $1.99, lower than the Zacks Consensus Estimate of $2.01. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.
Zacks Rank: Danaher currently carries a Zacks Rank #4 (Sell).
Highlights of Q1 Earnings
Danaher’s first-quarter 2023 adjusted earnings (excluding 42 cents from non-recurring items) of $2.36 per share surpassed the Zacks Consensus Estimate of $2.26. The bottom line decreased 14.5% year over year with a decline in sales. Net sales of $7,167 million outperformed the Zacks Consensus Estimate of $7,028.5 million. However, it declined 7% year over year due to a decrease in the sale of COVID-related products.
Stocks to Consider
Here are some companies, which according to our model, have the right combination of elements to beat on earnings in this reporting cycle.
Emerson Electric Co. EMR has an Earnings ESP of +2.35% and a Zacks Rank #2. The company is scheduled to release third-quarter fiscal 2023 (ended Jun 30, 2023) results on Aug 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Emerson pulled off a trailing four-quarter earnings surprise of 4.5%, on average. The stock has gained 5.5% in the past three months.
Allegion plc ALLE has an Earnings ESP of +3.94% and a Zacks Rank #3. The company is slated to release second-quarter 2023 results on Jul 26.
Allegion delivered a trailing four-quarter earnings surprise of 12.5%, on average. The stock has rallied 17.7% in the past three months.
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Emerson Electric Co. (EMR) : Free Stock Analysis Report
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