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Danaher's Q3 Earnings Beat Marginally - Analyst Blog

Posted
10/17/2013 11:07:00 AM
By: Zacks.com
Referenced Stocks:DHR;HON;HUWHY;MARUY

Danaher Corporation ( DHR ) reported net income of $597.0 million or 84 cents a share in the third quarter of 2013 compared with $548.7 million or 77 cents a share in the year-earlier quarter. The reported earnings marginally beat the Zacks Consensus Estimate by a penny.

The healthy increase in earnings was mainly attributable to core revenue growth and better margin expansion. Specific initiatives for new product development and increased investment were also positive drivers for the company. In addition, most of its segments, barring Environmental and Test & Measurement, reported a decent improvement in revenue year over year.

Revenue

Danaher generated total sales of $4.7 billion in the quarter, up 5.5% year over year. Core revenues for the quarter were up 3% year over year, while revenues from acquisitions were up 3.0%, partially offset by adverse currency translation effects of 0.5%.  The reported revenue exceeded the Zacks Consensus Estimate of $4.6 billion by 2.1%.

Margins

Danaher's gross margin expanded 40 basis points to 51.9%. The company's operating profit was $812.4 million down by 3.7% year over year, while operating margin increased marginally to 17.3% from 17.1%.

Segments

Revenues in the Test & Measurement segment declined 0.72% to $808.6 million year over year. The segment operating margin declined to 19.2% from 20.1% in the prior-year period.

Revenues in the Environmental segment were up by 9.8% to $828.7 million. The segment reported an operating profit margin of 20.7%, a decline of 82 basis points from 21.5% in last year.

Life Sciences and Diagnostics revenues wereup 10.3% year over year to $1.7 billion. The operating profit margin for the quarter was up 250 basis points year over year to 14.7%.

Revenues from the Dental segment grew 4.3% year over year to $510.2 million with operating profit margin growing 55 basis points to 16.1%.

In the Industrial Technologies segment, revenues grew marginally by 0.82% to $846.5 million with an operating margin growth of 70 basis points to 22.6%.

Balance Sheet & Cash Flow

Danaher ended the quarter with cash and equivalents balance of $2.0 billion versus $1.7 billion in Dec 2012. The company had a long-term debt balance of $3.4 billion, down from $5.2 billion at year-end 2012.

Danaher reported a drop in its cash flow during the quarter. Cash flow from operating activities was down 4.1% to $2,507.1 million compared with $2,671.3 million in the year-earlier quarter for the nine-month period ended on Sep 28.

Outlook

Concurrent with the earnings release, management provided its guidance for the fourth quarter and reaffirmed its outlook for full year 2013.

The company reaffirmed its previously announced full year 2013 earnings guidance in the range of $3.37 to $3.42 per share. For the fourth quarter of 2013, the company's earnings are expected to be in the range of 91 cents to 96 cents a share.

Danaher currently carries a Zacks Rank #4 (Sell). Other companies in the industry that are worth considering at present include Marubeni Corp. ( MARUY ), Hutchison Whampoa Ltd. ( HUWHY ) and Honeywell international, Inc. ( HON ). While Marubeni carries a Zacks Rank #1 (Strong Buy), Hutchison and Honeywell both carry a Zacks Rank #2 (Buy).



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