Danaher (DHR) Tops on Q4 Earnings, Suffers From Cost Woes

Danaher Corporation DHR has reported impressive results for the fourth quarter of 2021. The company’s earnings surpassed the Zacks Consensus Estimate by 7.6%. Its sales beat in the quarter was 4.38%.

In the reported quarter, the company’s adjusted earnings were $2.69 per share, surpassing the Zacks Consensus Estimate of $2.50. The bottom line increased 29.3% from the year-ago quarter’s figure of $2.08, mainly on sales growth and an improved margin profile. High costs and expenses played spoilsports in the quarter.

For 2021, the company’s adjusted earnings were $10.05 per share, increasing 59.3% from the previous year’s figure of $6.31. Also, the bottom line surpassed the Zacks Consensus estimate of $9.86.

Revenue Details

In the quarter under review, the company’s net sales were $8,148 million, reflecting year-over-year growth of 20.5%. Results were driven by solid segmental performances. Organic sales in the quarter increased 19.5% and acquisitions/divestments boosted sales by 2%. Foreign-currency translations left an adverse impact of 1% on the quarterly sales.

The pandemic-induced demand for products boosted sales by 9.5% and base business core sales (excludes the impacts of COVID-19 testing revenues) growth was 10% in the quarter. The company’s top line surpassed the Zacks Consensus Estimate of $7,806 million.

It reports net sales under three segments, namely Life Sciences, Diagnostics and Environmental & Applied Solutions. The segmental information is briefly discussed below:

Revenues for the Life Sciences segment totaled $4,046 million, rising 20.5% year over year. Acquisitions/divestments contributed 4.5% to sales growth, while foreign-currency translations lowered sales by 1%. Core sales grew 17% year over year.

Revenues in the Diagnostics segment grossed $2,881 million, increasing 29.4% year over year. The improvement came on the back of a 29% rise in core sales and a 1% gain from acquisitions. Foreign currency translation had an adverse impact of 0.5%.

Revenues in the Environmental & Applied Solutions segment totaled $1,221 million, up 4.2% year over year. Core sales expanded 7.5% and foreign currency translation had a negative impact of 0.5%. Acquisitions lowered sales by 3%.

For 2021, the company’s revenues totaled $29.5 billion, reflecting an increase of 32.2% from the previous year. Also, the top line surpassed the Zacks Consensus Estimate of $29.1 billion.

Margin Profile

In the quarter under review, Danaher’s cost of sales increased 14.2% year over year to $3,205 million. It represented 39.3% of net sales compared with 41.5% in the year-ago quarter. The gross profit of $4,943 million grew 25% year over year, while the margin increased 220 basis points (bps) year over year to 60.7%.

Selling, general and administrative expenses of $2,294 million witnessed a year-over-year increase of 17.2%. As a percentage of net sales, it represented 28.2% compared with 29% in the year-ago quarter. Research and development expenses were $495 million, which increased 25% year over year. It represented 6.1% of net sales compared with 5.9% in the year-ago quarter.

Operating income in the quarter under review increased 34.3% year over year to $2,154 million. The operating margin increased 270 bps to 26.4% in the quarter. Interest expenses in the quarter totaled $56 million, down 22.2% from the year-ago quarter.

Balance Sheet and Cash Flow

Exiting the fourth quarter, Danaher had cash and cash equivalents of $2,586 million, up1.3% from $2,552 million at the end of the last reported quarter. The long-term debt balance decreased 6% sequentially to $22,168 million.

In 2021, the company repaid $1,186 million of borrowings with a maturity of more than 90 days. Net proceeds from borrowings (with a maturity of less than 90 days) totaled $2,265 million in the period.

Danaher generated net cash of $8,358 million from operating activities (continuing operations) in 2021, reflecting a year-over-year increase of 34.5%. Capital used for purchasing property, plant and equipment totaled $1,294 million compared with $791 million in the previous year. Free cash flow (continuing operations) was $7,077 million, mirroring growth of 30.4% from the previous year.

The company paid out dividends worth $742 million to its shareholders in 2021, up 20.7% from the previous year.

Outlook

Danaher expects year-over-year core revenue growth of 10% for the first quarter of 2022 and mid-single digits for 2022.

The COVID-related impacts are anticipated to boost sales in low-single digits in the first quarter. The same is expected to adversely impact sales in the low-single digits in 2022.

Base business core sales growth is predicted to be in the high-single digitsboth for the first quarter and 2022.

Danaher Corporation Price, Consensus and EPS Surprise

Danaher Corporation price-consensus-eps-surprise-chart | Danaher Corporation Quote

Zacks Rank & Other Important Earnings Releases

With a market capitalization of $190.6 billion, Danaher currently carries a Zacks Rank #2 (Buy).

Three other companies from the industry to soon report results are discussed below:

Carlisle Companies Incorporated CSL will release fourth-quarter results on Feb 10, after market close. It presently carries a Zacks Rank #2.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The company reported better-than-expected results in the last four quarters, with an average earnings surprise of 38.89%. In the past 60 days, the Zacks Consensus Estimate for Carlisle’s fourth-quarter earnings has been revised down 0.4%.

ITT Inc. ITT is slated to release fourth-quarter results on Feb 9, after market close. It presently carries a Zacks Rank #2.

In the last four quarters, the company recorded better-than-expected results. It has a trailing four-quarter earnings surprise of +10.63%, on average. The Zacks Consensus Estimate for ITT’s fourth-quarter earnings has been unchanged in the past 60 days.

Honeywell International Inc. HON presently carries a Zacks Rank #4 (Sell). The company is slated to report fourth-quarter 2021 results on Feb 3, before market open.

With an earnings beat on all occasions, Honeywell’s earnings surprise for the last four quarters is 3.70%, on average. The Zacks Consensus Estimate for HON’s fourth-quarter earnings has decreased 1% in the past 60 days.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.