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Danaher Corporation (DHR - Free Report) reported adjusted earnings of $1.05 a share in fourth-quarter 2016, beating the Zacks Consensus Estimate of $1.03 by 1.9%. Also, adjusted earnings jumped 15.4% on a year-over-year basis.
The upside in the company’s bottom line can be attributed to its effective Danaher Business System (“DBS”) that focuses on three critical areas - quality, delivery, and cost & innovation. Moreover, a decent top-line performance led to impressive adjusted earnings growth during the quarter.
For full-year 2016, Danaher’s adjusted earnings came in at $3.61 per share, up 21.1% on a year-over-year basis.
Revenues by Segment
Danaher reported total sales of $4,584.3 million, reflecting an increase of 6.0% year over year. In addition, the figure surpassed the Zacks Consensus Estimate of $4,548 million.
For full-year 2016, Danaher reported net sales of $16,882.4 million, up 17% on a year-over-year basis.
Improvement in fourth-quarter revenues came on the back of positive contributions from both non-core and core businesses. While acquired businesses contributed 4.0% to overall growth, core businesses contributed 3.5%, both on a year-over-year basis. Also, the company’s diversified portfolio proved conducive to top-line growth.
Life Sciences revenues rose 6.0% year over year to $1,454 million. Operating margin for the quarter expanded 710 basis points (bps) to 16.8%. Positive contributions from both core and non-core businesses drove growth for this segment.
Revenues at the Diagnostics segment increased 11.0% year over year to $1,432 million. However, operating margin at the segment contracted 570 bps, year over year, to 12.6%. The growth of this segment mainly came on the back of acquired businesses (up 9.5% year over year).
Revenues at Dental inched up 0.5% year over year to $739 million. Operating margin shrunk 40 bps to 15.4%. Weak core business growth and absence of contributions from acquired businesses led to the dull performance of this segment.
At the Environmental & Applied Solutions segment, revenues were up 3.5% year over year to $959 million. Additionally, operating margin advanced 190 bps to 24.0% on a year-over-year basis. Impressive performance of core business (up 4%) drove growth for this segment.
Also, on a year-over-year basis, operating profit margin improved 80 basis points to 15.9%.
Danaher Corporation Price, Consensus and EPS Surprise
During the quarter, Danaher completed the buyout of molecular diagnostics company, Cepheid. Copper Merger Sub, Inc. – an indirect wholly owned subsidiary of Danaher – has been merged into Cepheid. Consequently, Cepheid has become an indirect wholly owned subsidiary of Danaher. This deal makes strategic sense as Danaher does not enjoy a strong foothold in molecular diagnostics, in which Cepheid is a market leader.
Cepheid’s comprehensive installed base, test menu and pioneering product portfolio will fortify Danaher’s presence in this high-growth segment. Per Danaher, Cepheid’s addition will boost operational efficiencies and expand margins in its $5 billion-worth diagnostics unit. Cepheid is likely to generate $618–$635 million in revenues this year, which will add to Danaher's $5-billion revenue base.
Liquidity
Danaher exited 2016 with free cash flow of $2,498 million, an increase from $2,319 million.
Guidance
Concurrent with the earnings release, Danaher provided its guidance for first-quarter 2017. The company projects adjusted earnings per share in the range of $0.82–$0.85.
Furthermore, Danaher offered its full-year 2017 adjusted earnings guidance. The company projects non-GAAP adjusted earnings per share to be in the range of $3.85–$3.95, assuming non-GAAP core revenue growth in the range of 3–4%.
To Conclude
The year 2016 was a spectacular year for Danaher, marked by solid quarterly performances, accretive acquisitions and a strategic divesture, which split the company into two units and will help drive focused growth going ahead. The company’s fourth-quarter results, like the ones preceding it, have been largely impressive, with double-digit earnings growth, meaningful margin expansion, and solid free cash flow.
The year 2017 holds a unique set of opportunities as well as challenges for this Zacks Rank #3 (Hold) company. While the recent acquisitions of major firms, including Cepheid and Phenomenex, are anticipated to reinforce its Diagnostics and Life Sciences businesses; the impact of the Fortive Corporation (FTV - Free Report) spin-off remains to be seen. We believe the ability to execute its restructuring plans will play a crucial part for the company’s future.
Key Picks
Some better-ranked stocks in the industry include Leucadia National Corp. and Hitachi, Ltd. (HTHIY - Free Report) . While Leucadia National flaunts a Zacks Rank #1 (Strong Buy), Hitachi holds a Zacks Rank #2 (Buy).
Hitachi has a long-term earnings growth expectation of 13%.
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Danaher (DHR) Q4 Earnings & Revenues Top, Increase Y/Y
Danaher Corporation (DHR - Free Report) reported adjusted earnings of $1.05 a share in fourth-quarter 2016, beating the Zacks Consensus Estimate of $1.03 by 1.9%. Also, adjusted earnings jumped 15.4% on a year-over-year basis.
The upside in the company’s bottom line can be attributed to its effective Danaher Business System (“DBS”) that focuses on three critical areas - quality, delivery, and cost & innovation. Moreover, a decent top-line performance led to impressive adjusted earnings growth during the quarter.
For full-year 2016, Danaher’s adjusted earnings came in at $3.61 per share, up 21.1% on a year-over-year basis.
Revenues by Segment
Danaher reported total sales of $4,584.3 million, reflecting an increase of 6.0% year over year. In addition, the figure surpassed the Zacks Consensus Estimate of $4,548 million.
For full-year 2016, Danaher reported net sales of $16,882.4 million, up 17% on a year-over-year basis.
Improvement in fourth-quarter revenues came on the back of positive contributions from both non-core and core businesses. While acquired businesses contributed 4.0% to overall growth, core businesses contributed 3.5%, both on a year-over-year basis. Also, the company’s diversified portfolio proved conducive to top-line growth.
Life Sciences revenues rose 6.0% year over year to $1,454 million. Operating margin for the quarter expanded 710 basis points (bps) to 16.8%. Positive contributions from both core and non-core businesses drove growth for this segment.
Revenues at the Diagnostics segment increased 11.0% year over year to $1,432 million. However, operating margin at the segment contracted 570 bps, year over year, to 12.6%. The growth of this segment mainly came on the back of acquired businesses (up 9.5% year over year).
Revenues at Dental inched up 0.5% year over year to $739 million. Operating margin shrunk 40 bps to 15.4%. Weak core business growth and absence of contributions from acquired businesses led to the dull performance of this segment.
At the Environmental & Applied Solutions segment, revenues were up 3.5% year over year to $959 million. Additionally, operating margin advanced 190 bps to 24.0% on a year-over-year basis. Impressive performance of core business (up 4%) drove growth for this segment.
Also, on a year-over-year basis, operating profit margin improved 80 basis points to 15.9%.
Danaher Corporation Price, Consensus and EPS Surprise
Danaher Corporation Price, Consensus and EPS Surprise | Danaher Corporation Quote
Notable Activity during the Quarter
During the quarter, Danaher completed the buyout of molecular diagnostics company, Cepheid. Copper Merger Sub, Inc. – an indirect wholly owned subsidiary of Danaher – has been merged into Cepheid. Consequently, Cepheid has become an indirect wholly owned subsidiary of Danaher. This deal makes strategic sense as Danaher does not enjoy a strong foothold in molecular diagnostics, in which Cepheid is a market leader.
Cepheid’s comprehensive installed base, test menu and pioneering product portfolio will fortify Danaher’s presence in this high-growth segment. Per Danaher, Cepheid’s addition will boost operational efficiencies and expand margins in its $5 billion-worth diagnostics unit. Cepheid is likely to generate $618–$635 million in revenues this year, which will add to Danaher's $5-billion revenue base.
Liquidity
Danaher exited 2016 with free cash flow of $2,498 million, an increase from $2,319 million.
Guidance
Concurrent with the earnings release, Danaher provided its guidance for first-quarter 2017. The company projects adjusted earnings per share in the range of $0.82–$0.85.
Furthermore, Danaher offered its full-year 2017 adjusted earnings guidance. The company projects non-GAAP adjusted earnings per share to be in the range of $3.85–$3.95, assuming non-GAAP core revenue growth in the range of 3–4%.
To Conclude
The year 2016 was a spectacular year for Danaher, marked by solid quarterly performances, accretive acquisitions and a strategic divesture, which split the company into two units and will help drive focused growth going ahead. The company’s fourth-quarter results, like the ones preceding it, have been largely impressive, with double-digit earnings growth, meaningful margin expansion, and solid free cash flow.
The year 2017 holds a unique set of opportunities as well as challenges for this Zacks Rank #3 (Hold) company. While the recent acquisitions of major firms, including Cepheid and Phenomenex, are anticipated to reinforce its Diagnostics and Life Sciences businesses; the impact of the Fortive Corporation (FTV - Free Report) spin-off remains to be seen. We believe the ability to execute its restructuring plans will play a crucial part for the company’s future.
Key Picks
Some better-ranked stocks in the industry include Leucadia National Corp. and Hitachi, Ltd. (HTHIY - Free Report) . While Leucadia National flaunts a Zacks Rank #1 (Strong Buy), Hitachi holds a Zacks Rank #2 (Buy).
Leucadia National Corporation delivered a whopping average positive earnings surprise of 179.0% for the last four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.
Hitachi has a long-term earnings growth expectation of 13%.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>