Danaher is placing bioprocessing again on observe for progress. We’re growing our ranking again to “Purchase”.
Danaher shares fell on Tuesday even as the life sciences company brought its key bioprocessing business back to growth in the third quarter. Danaher's revenue rose 3% to $5.8 billion on a reported basis in the three months ended Sept. 27 from the same period last year, beating the LSEG consensus estimate of $5.59 billion. On an organic basis, sales increased by 0.5%. Adjusted earnings per share fell 0.6% annually to $1.71, but still beat expectations of $1.57 per share. DHR YTD Berg Danaher YTD The stock fell 4% as investors questioned the sustainability and extent of improvements in bioprocessing in 2025. Wall Street's reaction does not reflect the progress Danaher has made in this important end market, which is included in the company's biotechnology segment. Some of Tuesday's weakness could also be due to profit-taking, as Danaher shares jumped on solid results from German life sciences company Sartorius last week. Bioprocessing is the use of cellular components to produce a variety of products, including targeted therapies. Danaher is a leader in products and services that support healthcare research and development. The bottom line is that Danaher's share price decline represents a buying opportunity, and we upgrade it to our Buy rating of 1 and increase our price target to $305 per share from $295. As long-standing inventory depletion headwinds eased, demand from larger bioprocessing customers improved. However, bioprocessing in China remained suppressed. Management said a recovery there “may take more time” in the near term. In addition to better-than-expected biotechnology sales, Danaher's life sciences and diagnostics segments were also strong. Danaher Why We Own the Company: Danaher is a world-class life sciences and diagnostics company with a management team that has consistently demonstrated its ability to find new avenues for growth. We expect there will be a turnaround in bioprocessing orders this year as biotech funding picks up and larger customers wind down efforts to clear Covid-era excess inventory. Competitors: Sartorius and Thermo Fisher Scientific Portfolio Weight: 4.6% Last Purchased: July 2, 2024 Initiated: January 3, 2022 Free cash flow was better than expected at $1.23 billion, representing growth of nearly 12% % compared to the same period last year. The company also achieved a free cash flow to net income ratio of 150%. Since the beginning of the year, this ratio has been 135%. This means that the company's earnings are fully backed by cash and are of a higher quality than earnings without the same or greater amount of cash. In the third quarter, management bought back around 2.6 million shares. Comment Biotechnology segment revenue fell 0.7% to $1.65 billion on a core basis in the third quarter, but beat estimates. Bioprocessing reported low single-digit growth in the quarter. Bioprocessing has been under pressure in recent quarters as smaller companies lacked financing following the collapse of Silicon Valley Bank in early 2023 and destocking at larger customers due to the Covid pandemic. On the post-earnings conference call, Danaher CEO Rainer Blair said, “We're not seeing the same level.” [large customer] Improving the underlying performance of our smaller customers. Despite a modest improvement in the [biotech] Due to the financing environment, they continue to rationalize their therapeutic programs and remain cautious in their investments.” that “the announced stimulus measures in China have not yet resulted in significant order activity as customers are still waiting for details on the implementation of these programs.” The core base rose $2.36 billion, beating estimates. At its molecular diagnostics subsidiary Cepheid, the team highlighted that sales in both the respiratory and non-respiratory sectors more than doubled management's expectations remained due to higher volumes and a favorable combination of the 4-in -1 tests for Covid-19, flu A, flu B and respiratory syncytial virus (RSV) below expectations. Forecast For the current quarter, the fourth of the 2024 fiscal year, Danaher expects a core sales decline in the low single-digit range compared to the previous year. This is a failure. According to FactSet, an increase of 2.6% was expected. Management's forecast for the full year remained unchanged. The team expects total sales to decline in the low single digits, compared to expectations for a decline of 0.5%. (Jim Cramer's Charitable Trust is long DHR. A full list of stocks can be found here.) As a subscriber to CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable foundation's portfolio. If Jim discussed a stock on CNBC television, he waits 72 hours after the trade alert is issued before executing the trade. THE INVESTING CLUB INFORMATION SET FORTH ABOVE IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, ALONG WITH OUR DISCLAIMER. THERE ARE NO fiduciary duty or duty IN RECEIVING YOUR INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULTS OR PROFITS ARE GUARANTEED.
In this illustration, a Danaher Corporation logo is seen on a tablet.
Igor Golovnov | SOPA images | Light rocket | Getty Images
Danaher Shares fell on Tuesday even as the life sciences company brought its key bioprocessing business back to growth in the third quarter.
Comments are closed.