Danaher Corporation DHR delivered adjusted earnings of $1.19 a share in fourth-quarter 2017, beating the Zacks Consensus Estimate of $1.16 by 2.6%. Further, adjusted earnings increased 13.3% on a year-over-year basis.
The upside in the company’s bottom-line can largely be attributed to Danaher Business System (“DBS”) that focuses on three critical areas — quality, delivery, and cost & innovation. Moreover, a decent top-line performance led to double-digit adjusted earnings per share growth, solid margin expansion as well as strong cash flow during the quarter.
For full-year 2017, Danaher’s adjusted earnings came in at $3.50 per share, up 13.5% on a year-over-year basis.
Inside The Headlines
The company reported total sales of $5,085.7 million, reflecting an increase of 10.9% year over year. Moreover, the sales figure surpassed the Zacks Consensus Estimate of $4,972 million. Further, core businesses grew 5.5% year over year, partially offset by adverse effect of currency exchange rates fluctuations.
For 2017, Danaher reported net sales of $ 18,329.7 million, up 8.6% on a year-over-year basis.
Danaher Corporation Price, Consensus and EPS Surprise
Danaher Corporation Price, Consensus and EPS Surprise | Danaher Corporation Quote
Life Sciences revenues rose 11.8% year over year to $1,625.1 million. Operating margin for the quarter increased 320 basis points (bps) to 20.0%. Impressive growth in operating margin came primarily on the back of increased sales volumes. Revenues at the Diagnostics segment recorded an increase of 13.4% year over year to $ 1,623.9 million. Moreover, operating margin at the segment increased 690 bps year over year to 19.5%.
Revenues at Dental were up 2.6% year over year to $758.8 million. However, operating margin decreased 230 bps to 13.1%. The Environmental & Applied Solutions segment witnessed revenue growth of 12.4% year over year to $1,077.9 million. However, operating margin fell 90 bps to 23.1% on a year-over-year basis.
On a year-over-year basis, operating profit margin improved 270 bps to 18.6%.
Liquidity
As of Dec 31, 2017, Danaher had cash and equivalents of $630.3 million compared with the year-ago figure of $963.7 million.
Outlook
Concurrent with the earnings release, Danaher provided guidance for first-quarter 2018. The company projects adjusted earnings per share in the range of 90-93 cents.
Moreover, Danaher provided full-year 2018 adjusted earnings guidance. The company currently expects adjusted net earnings per share in the band of $4.25-$4.35.
Our Take
2017 was a spectacular year for Danaher, marked by solid margin improvement, continued growth investment as well as strong performance at its recently acquired larger businesses. Also, the company expects core growth rate to accelerate going forward, in light of improving order trends and recent acquisitions like Cepheid and Phenomenex forming a part of core revenues.
Moreover, the company has successfully repositioned itself as a healthcare company, broadening presence in the healthcare and dental markets. This is expected to benefit from the rise in aging population and increased spending on healthcare and fitness.
Danaher currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some stocks worth considering in the same space include Hitachi Ltd. HTHIY, Leucadia National Corporation LUK and Raven Industries, Inc. RAVN. While Hitachi sports a Zacks Rank #1 (Strong Buy), Leucadia National and Raven Industries carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Hitachi has an excellent earnings surprise history, beating estimates in the trailing four quarters with an average beat of 85.8%.
Leucadia National has a modest earnings surprise history over the trailing four quarters, having beaten estimates thrice. It has delivered an average beat of 21.2%.
Raven Industries has posted earnings beat thrice in the trailing four quarters. It boasts an average surprise of 25.8%.
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