Danaher Surpasses Expectations in Q3, Bioprocessing Drives Growth, But Outlook Remains Cautious
Danaher Corporation (DHR) reported strong third-quarter results, exceeding analysts’ expectations for both revenue and earnings. The company’s sales reached $5.79 billion, a 3% increase year-over-year, surpassing the consensus estimate of $5.59 billion. This positive performance was driven by continued momentum in its bioprocessing business, a key growth driver for Danaher.
Non-GAAP core revenue, a key metric for investors, grew by 0.5%, exceeding expectations for a decline in the low single digits. Adjusted earnings per share (EPS) came in at $1.71, beating the consensus estimate of $1.57. The company also generated strong cash flow, with operating cash flow reaching $1.5 billion and non-GAAP free cash flow hitting $1.2 billion.
Bioprocessing Remains a Bright Spot
Danaher’s CEO, Rainer Blair, highlighted the continued strength of its bioprocessing business, stating, “We were especially pleased with the continued positive momentum in our bioprocessing business and believe Cepheid gained market share in molecular testing again this quarter.” The company’s biotechnology segment sales remained relatively stable at $1.65 billion, while its Life Sciences segment sales increased slightly to $1.78 billion from $1.71 billion a year ago. Notably, diagnostic sales grew from $2.25 billion to $2.36 billion.
Danaher’s operating margin also exceeded expectations, reaching 27.5%, surpassing the company’s guidance of around 26%.
Cautious Outlook for 2024
Despite the strong third-quarter performance, Danaher issued a cautious outlook for 2024, citing a challenging macroeconomic environment. The company expects non-GAAP core revenue to decline in the low single digits year-over-year. It also forecasted a low single-digit decline in bioprocessing core revenue for 2024, while Cepheid’s respiratory revenues are expected to reach around $1.7 billion, up from the prior guidance of $1.6 billion.
Danaher remains optimistic about its long-term growth prospects, particularly in its bioprocessing business. The company anticipates a gradual improvement in bioprocessing core revenue growth in the fourth quarter of 2024, expecting it to be in the high single digits. Cepheid’s respiratory revenue is projected to be approximately $350 million in the fourth quarter, with an adjusted operating profit margin of around 30%.
Investor Response
Investors reacted positively to Danaher’s third-quarter results, with DHR stock trading up 2.18% at $278 during the premarket session following the earnings announcement. The company’s strong performance in its bioprocessing business, coupled with its continued focus on operational efficiency and a healthy cash flow generation, appears to have boosted investor sentiment.