Danaher Corporation (DHR) reported adjusted earnings of $1.04 a share in fourth-quarter 2014, in line with the Zacks Consensus Estimate. Adjusted earnings increased 8.3% compared with the prior-year figure of 96 cents per share. Also, Danaher’s full-year 2014 earnings of $3.68 per share increased 7.6% as compared to $3.42 per share reported year ago.
The increase in the bottom line was mainly attributable to core revenue growth, driven by the company’s operating culture – Danaher Business System. The system has been effectively augmenting the company’s margins and cash flow.
On a GAAP basis, the company’s fourth-quarter 2014 earnings came in at 92 cents per share (including 9 cents related to gain on the sale of marketable securities), which decreased 17.1% on a year-over-year basis. Moreover, the company’s full-year 2014 earnings of $3.63 per share on a GAAP basis came 4.5% below the year-ago figure.
Inside the Headlines
Danaher reported total sales of $5,417.2 million, an increase of 3.0% year over year. However, reported revenues fell short of the Zacks Consensus Estimate of $5,420 million. This was attributable to core and acquisitions revenues increases of 4.0% and 2.5%, respectively, on a year-over-year basis, which was partially offset by unfavorable currency translation effect of 3.5%.
On the other hand, Danaher’s operating margin dipped to 16.4% from 16.9% in the quarter. For the full year, the company’s operating margin rose to 17.2% from 17.1% on a year-over-year basis.
As per the segments, revenues in the Test & Measurement segment increased 1.7% year over year to $913.4 million. The segment operating margin rose yearly to 17.9% from 16.6%.
Revenues in the Environmental segment were up 5.6% to $988.5 million. The segment reported an operating margin of 19.2%, a decline from 22.5% in the year-ago quarter.
Life Sciences and Diagnostics segment revenues were up 2.9% year over year to $1,994.9 million. The operating margin for the quarter decreased yearly to 16.6% from 16.7%.
Revenues from the Dental segment grew 6.2% year over year to $626.9 million with operating margin dropping to 9.5% from 13.7%.
In the Industrial Technologies segment, revenues dipped 1% to $893.5 million, while the operating margin increased to 20.4% from 17.3% on a year-over-year basis.
Liquidity
Danaher exited the year 2014 with cash and equivalents balance of $3,005.6 million versus $3,115.2 million as the end of 2013. The company had a long-term debt of $3,401.5 million at the end of the year, as compared to $3,436.7 million as on Dec 31, 2013.
At the end of 2014, Danaher’s cash flow from operating activities increased to $3,758.4 million from $3585.3 million in the prior-year period.
Guidance
The company expects first-quarter 2015 adjusted earnings per share to be in the range of 90 – 94 cents. The Zacks Consensus Estimate for the same, which stands at 91 cents, is within this range.
Also, Danaher expects its 2015 adjusted earnings per share to be in the range of $4.30 – $4.40 per share. This is above the Zacks Consensus Estimate for the same, which stands at $4.14.
Our View
Danaher came up with in-line earnings again this season, with its core operating culture being the driver and unfavorable currency translation being the headwind. The company’s balance sheet position is improving, which promises significant acquisition capacity and is likely to drive growth, going forward.
Danaher currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the same sector include Federal Signal Corp. (FSS), Keppel (KPELY) and Swire Pacific Ltd. (SWRAY), all carrying a Zacks Rank #2 (Buy).
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