Danaher Corporation’s (DHR Quick QuoteDHR - Free Report) fourth-quarter 2023 adjusted earnings (excluding 59 cents from non-recurring items) of $2.09 per share surpassed the Zacks Consensus Estimate of $1.90. The bottom line declined 17.7% year over year.

Danaher’s net sales of $6,405 million outperformed the consensus estimate of $5,990 million. However, the metric declined 10.2% year over year due to a decrease in sales of COVID-related products and weakness in the Biotechnology and Diagnostics segments.

Organic sales in the quarter decreased 11.5%. Foreign-currency translations and acquisitions had a positive impact of 1% and 0.5%, respectively, on quarterly sales. Base business core sales (adjusted) declined 4.5% in the quarter.

For 2023, Danaher reported net sales of $23.9 billion, declining 10.3% year over year. For the year, the company’s adjusted earnings came in at $7.58 per share compared with $9.71 in 2022.

Segmental Discussion in Q4

On Sep 30, 2023, Danaher completed the separation of its Environmental & Applied Solutions segment. It currently operates under the operating segments discussed below.

Revenues from the Life Sciences segment totaled $1.93 billion, down 1% year over year. Core sales dipped 4% year over year. Acquisitions/divestitures led to a 2.5% increase in sales. Operating profit was $235 million for the quarter, down 40% year over year. We expected the Life Sciences segment’s revenues to be $1.84 billion.

Revenues from the Diagnostics segment totaled $2.72 billion, down 8.5% year over year. Our estimate for revenues in the quarter was $2.37 billion. The downside was due to an 8.5% decline in core sales. Foreign currency or acquisitions did not have any material impact on sales. Operating profit was $766 million for the quarter, down 22.5% on a year-over-year basis.

Revenues from the Biotechnology segment totaled $1.76 billion, down 21% year over year. Our estimate for the quarter was $1.68 billion. Core sales dropped 22.5% for the segment. Operating profit was $416 million for the quarter, down 40% year over year.

Margin Profile

In the fourth quarter, Danaher’s cost of sales decreased 9.7% year over year to $2.63 billion. Gross profit of $3.78 billion fell 10.6% year over year. Gross margin in the quarter was 59% compared with 59.2% in the year-ago quarter.

Selling, general and administrative expenses of $2.04 billion, an increase of 11.3% on a year-over-year basis. Research and development expenses were $407 million, up nearly 1.8% year over year.

Danaher’s operating profit in the reported quarter dropped 33% year over year to $1.34 billion. Operating margin decreased to 20.9% from 28% in the year-ago quarter.

Balance Sheet and Cash Flow

Exiting the fourth quarter, DHR had cash and equivalents of $5.86 billion compared with about $6 billion at 2022-end. Long-term debt was $16.7 billion at the end of the reported quarter compared with $19.1 billion at the end of December 2022.

Danaher generated net cash of $7.16 billion from operating activities in 2023 compared with $8.52 billion in the previous year. Capital expenditures totaled $1.38 billion in the same period, up 23.7% year over year. Adjusted free cash flow was $5.1 billion in 2023 compared with $6.5 billion in the previous year.

In 2023, DHR paid out dividends of $821 million, up around 0.4% on a year-over-year basis.

Outlook

For the first quarter of 2024, Danaher expects adjusted core revenues from continuing operations to decline in high-single digits on a year-over-year basis.

The same is anticipated to decrease in low-single digits on a year-over-year basis in 2024.

Zacks Rank & Stocks to Consider

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

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