Will Life-Sciences Growth Drive Danaher (DHR) Q4 Earnings?

Danaher Corporation (NYSE:DHR) is scheduled to report fourth-quarter 2017 results before the opening bell on Jan 30. In the quarter to be reported, the company is expected to post strong growth in Life Sciences & Diagnostics business.

Last quarter, the company’s adjusted earnings beat the Zacks Consensus Estimate of 95 cents by 5.3%. The company has a consistent earnings surprise history, with an average positive surprise of 2.6% in the trailing four quarters.

Let’s see how things are shaping up for this announcement.

What’s Driving Better-Than-Expected Earnings?

Danaher has successfully positioned itself as a healthcare company, broadening its presence in the healthcare and dental markets. Potential prospects in the pharma and clinical end-markets bode well for the company in the upcoming quarters. Further, Danaher’s robust biopharma business should prove conducive to operating profit and bottom line in the fourth quarter.

The company has had an impressive 2017, delivering core growth acceleration, operating margin expansion as well as double-digit growth in earnings. Moreover, the company’s recent acquisitions continue to perform impressively, which have helped it improve productivity and drive growth. These factors should have a positive impact on the company’s upcoming results. The company also expects core growth rate to accelerate, in light of the improving order trends and recent acquisitions like Cepheid and Phenomenex.

Danaher Corporation Price and EPS Surprise

Phenomenex has meaningfully enhanced its Life Sciences portfolio and is anticipated to help the company achieve a double-digit return on investment in less than five years. The Zacks Consensus Estimate for revenues from the Life Sciences & Diagnostics business in the to-be-reported quarter currently remains high at $1,453 million compared with the third-quarter reported revenues of $1,393 million. The Dental and Environmental & Applied Solutions segments also project decent sequential growth in sales, per our estimates.

Furthermore, the company’s constant focus on introduction of products to penetrate new markets has enabled it to gain competitive edge over peers. Danaher remains optimistic about core revenue and earnings growth, on the back of improving order trends and its operating culture, Danaher Business System (“DBS”). Historically, DBS has contributed to meaningful core revenue growth, adjusted earnings per share improvement and cash flow generation.

Earnings Whispers

Our proven model shows that Danaher has the right combination of the two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is perfectly the case here as you will see below:

Zacks ESP: Danaher has an Earnings ESP of +1.39%, as the Most Accurate estimate of $1.17 is pegged higher than the Zacks Consensus Estimate of $1.16. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company carries a Zacks Rank #3, which when combined with a positive ESP, makes us reasonably confident of an earnings beat.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks That Warrant a Look

Here are some other companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Allison Transmission Holdings, Inc. (NYSE:ALSN) , with an Earnings ESP of +10.40% and a Zacks Rank #2, is expected to release quarterly numbers around Feb 5. You can see the complete list of today’s Zacks #1 Rank stocks here.

Catalent, Inc. (NYSE:CTLT) , with an Earnings ESP of +1.91% and a Zacks Rank #3, is slated to report results on Feb 5.

Hess Corporation (NYSE:HES) , with an Earnings ESP of +1.97% and a Zacks Rank #3, is expected to report quarterly figures around Feb 5.

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