Danaher (DHR) Q4 Earnings & Revenues Beat Estimates, Up Y/Y

Danaher Corporation (NYSE:DHR) reported better-than-expected bottom-line results for the fourth quarter of 2018, delivering a positive surprise of 0.8%. This is the company’s 12th consecutive quarter of earnings beat.

The company’s adjusted earnings in the reported quarter were $1.28 per share, surpassing the Zacks Consensus Estimate of $1.27. Moreover, the bottom line increased 7.6% from the year-ago quarter’s figure of $1.19. The upside can be primarily attributed to impressive sales growth and improved operating income.

For full-year 2018, Danaher’s adjusted earnings came in at $4.52 per share, up 12% on a year-over-year basis.

Inside the Headiness

For the quarter under review, Danaher’s net sales were $5,363.5 million, up 5.5% from the year-ago quarter. Organic sales grew 5.5% and acquired assets had a positive 2% impact. However, foreign currency translations had a negative impact of 2%. Further, the sales figure surpassed the Zacks Consensus Estimate of $5,321 million.

For 2018, Danaher reported net sales of $19,893 million, up 8.5% on a year-over-year basis.

The company reports its net sales in four segments — Life Sciences, Diagnostics, Dental and Environmental & Applied Solutions. The segmental information is briefly discussed below:

Life Sciences generated revenues of $1,793.5 million, up 10.4% year over year. Operating income for the segment increased 9.1% to $353.7 million, primarily on the back of increased sales volumes. Diagnostics’ revenues increased 3.7% to $1,684.5 million. The segment’s operating income remained stable at $317.4 million.

Dental revenues remained relatively stable year over year at $759 million. Moreover, operating income increased 5.6% to $104.9 million. Environmental & Applied Solutions witnessed revenue growth of 4.5% to $1,126.5 million. Also, the segment’s operating income increased 2.8% to $255.5 million.

Mixed Margin Profile

Danaher’s cost of sales increased 7.2% year over year to $2,407.6 million in the fourth quarter. It represented 44.9% of net sales compared with 44.2% in the year-ago quarter. Gross margin in the quarter declined 70 basis points (bps) to 55.1%.

Selling, general and administrative expenses increased 4.4% year over year to $1,673.7 million. It represented 31.2% of net sales. Research and development expenses were $319.6 million, up %. It represented 6% of net sales.

Operating income in the quarter under review increased 2.7% year over year to $962.6 million. However, operating profit margin for the reported quarter declined 50 bps to 17.9%.

Liquidity

As of Dec 31, 2018, Danaher had cash and equivalents of $787.8 million compared with the year-ago figure of $630.3 million.

Notably, the company paid dividends worth $433.4 million to shareholders in 2018.

Outlook

Danaher believes sturdier demand for innovative products will continue to drive its revenues in the quarters ahead. Also, robust top-line performance and effective Danaher Business System implementation will likely bolster profitability.

Concurrent with the earnings release, Danaher provided guidance for first-quarter 2019. The company projects adjusted earnings per share in the range of $1.00-$1.03.

Moreover, Danaher provided full-year 2019 adjusted earnings guidance. The company currently expects adjusted net earnings per share in the band of $4.75-$4.85.

Zacks Rank & Key Picks

Danaher currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same space are Hitachi Ltd. (OTC:HTHIY) , Carlisle Companies Incorporated (NYSE:CSL) and HC2 Holdings, Inc. (NYSE:HCHC) . While Hitachi sports a Zacks Rank #1 (Strong Buy), Carlisle and HC2 Holdings carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Hitachi delivered average earnings surprise of 55.51% in the trailing four quarters.

Carlisle pulled off average positive earnings surprise of 11.90% in the trailing four quarters.

HC2 Holdings outpaced estimates in the last reported quarter by 111.90%.

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