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Danaher Corp Earnings - Analysis & Highlights for Q4 2024
Overview
PositivesNegativesOutlook
- Adjusted diluted net earnings per common share of $2.14 were up 2.4% YoY, and the company generated $1.5 billion of free cash flow in Q4.
- The company finished the year strong with better than anticipated core revenue in all three of its segments.
- The company is well positioned to support its customers today and for the long term with its comprehensive portfolio and an innovation engine focused on increasing yields and enhancing manufacturing efficiencies.
- The company is confident it can leverage its portfolio and the Danaher Business System to continue to outperform.
- The company is better positioned than at any point in its 40-year history.
- Core revenue is expected to decline in the low-single-digit-percentage range in Q1.
- Market conditions in China continue to be challenging as customers remain cautious with their investments.
- The company saw a modest benefit from the ongoing stimulus program in China, but market conditions remain challenging.
- The company saw a bit of a step up in Q2, but Q3 was lower than Q2.
- Core revenue is expected to decline in the low-single-digit-percentage range in Q1.
- The company expects a full-year adjusted operating profit margin of approximately 28.5%.
- The company expects a Q1 adjusted operating profit margin of approximately 26.5%.
Q&A Highlights from Danaher Corp Earnings Call Q4 2024
- Analyst asked about the ramp in the operating businesses, specifically in Life Sciences, and when the company will return to growth.
- Rainer M. Blair, CEO, stated that for 2025 in Life Sciences, there is some noise in the external environment, but the company is assuming a prudent approach to the guide, with tools up for low single digits and Pall and genomics down. The company expects each quarter to get a little better, and the phasing is likely to be reasonably back-half weighted.
- Rainer M. Blair, CEO, stated that for 2025 in Life Sciences, there is some noise in the external environment, but the company is assuming a prudent approach to the guide, with tools up for low single digits and Pall and genomics down. The company expects each quarter to get a little better, and the phasing is likely to be reasonably back-half weighted.
- Analyst asked about the change in the volume-based procurement (VBP) in China, specifically the increase from $50 million to $150 million for the year.
- Matthew R. McGrew, CFO, explained that the VBP accelerated in Q4 due to a more aggressive stance from the Chinese government to address VBP and reimbursement cuts. The company saw tenders and reimbursement cuts come through, informing their guidance for going forward.
- Matthew R. McGrew, CFO, explained that the VBP accelerated in Q4 due to a more aggressive stance from the Chinese government to address VBP and reimbursement cuts. The company saw tenders and reimbursement cuts come through, informing their guidance for going forward.
- Analyst asked about the company's core growth rate for 2025 and the recovery of the bioprocessing business.
- The company expects a core growth rate of 6% to 7% in 2025, which is similar to the growth rate seen in Q4. The company is encouraged by the recovery of the bioprocessing business, with six consecutive quarters of high single-digit orders growth and a 30% increase in orders growth in Q4. The company is seeing improvements in consumables and equipment orders, but not quite back to normal levels.
- The company expects a core growth rate of 6% to 7% in 2025, which is similar to the growth rate seen in Q4. The company is encouraged by the recovery of the bioprocessing business, with six consecutive quarters of high single-digit orders growth and a 30% increase in orders growth in Q4. The company is seeing improvements in consumables and equipment orders, but not quite back to normal levels.
- Analyst asked about the progress of the Abcam and Aldevron deals compared to the deal model.
- The company is still tracking close to the deal model for Abcam, which is a relatively new acquisition. Aldevron is behind the deal model due to the end markets of genomics taking longer to round out. The company is working hard to close the gap and remains committed to the business, as it is important for the company to have a presence in genomics.
- The company is still tracking close to the deal model for Abcam, which is a relatively new acquisition. Aldevron is behind the deal model due to the end markets of genomics taking longer to round out. The company is working hard to close the gap and remains committed to the business, as it is important for the company to have a presence in genomics.
- Analyst asked about the impact of patent expirations on Danaher's growth, specifically the benefit of biosimilars to the bioproduction business.
- Rainer M. Blair explained that the bioprocessing business is driven by volume, and as more volume is processed, Danaher benefits and drives growth, both top and bottom. He also mentioned that the momentum of monoclonal antibodies, which represent 75% of the business, is a significant driver of growth. Biosimilars are also a tailwind for Danaher, as they penetrate new patient groups and increase volume.
- Rainer M. Blair explained that the bioprocessing business is driven by volume, and as more volume is processed, Danaher benefits and drives growth, both top and bottom. He also mentioned that the momentum of monoclonal antibodies, which represent 75% of the business, is a significant driver of growth. Biosimilars are also a tailwind for Danaher, as they penetrate new patient groups and increase volume.
- Analyst asked about the deal pipeline for Danaher.
- Matthew R. McGrew mentioned that Danaher has completed a $1.9 billion share buyback in Q4 and Q1, and the company has seen more activity in the tools space. Rainer M. Blair added that Danaher is active across all three segments, cultivating assets and exploring new opportunities. The company has a disciplined approach to deal-making, looking for end markets with secular growth drivers, companies they like, and valuations that work. Danaher feels well-positioned with its balance sheet and is seeing more activity in the market.
- Matthew R. McGrew mentioned that Danaher has completed a $1.9 billion share buyback in Q4 and Q1, and the company has seen more activity in the tools space. Rainer M. Blair added that Danaher is active across all three segments, cultivating assets and exploring new opportunities. The company has a disciplined approach to deal-making, looking for end markets with secular growth drivers, companies they like, and valuations that work. Danaher feels well-positioned with its balance sheet and is seeing more activity in the market.
- Analyst asked about the risk of export controls affecting the Life Sciences sector, specifically for Danaher Corp.
- Rainer M. Blair, CEO of Danaher Corp, stated that the current export controls are not meaningful for the company's portfolio, which is positioned differently. He also mentioned that the category has required export licenses for many years and that the recent expansion of the category to include some other technologies is not new for Life Sciences. He stated that during the normal course of any administration, these kinds of export controls are regularly reviewed and adjusted, but that Danaher does not expect anything particularly different than the standard process.
- Rainer M. Blair, CEO of Danaher Corp, stated that the current export controls are not meaningful for the company's portfolio, which is positioned differently. He also mentioned that the category has required export licenses for many years and that the recent expansion of the category to include some other technologies is not new for Life Sciences. He stated that during the normal course of any administration, these kinds of export controls are regularly reviewed and adjusted, but that Danaher does not expect anything particularly different than the standard process.
- Analyst asked about the pace of recovery throughout the year in bioprocessing and how it will impact growth in that portion.
- Rainer M. Blair, CEO of Danaher Corp, stated that the recovery in bioprocessing is well underway and that the company is seeing positive development in nearly every category of the bioprocessing portfolio. He mentioned that the guide for 2023 is 6% to 7% core growth on a quarterly basis, and that the company expects to see a positive development throughout the year. He also stated that the multi-year stacks show that this is in line with a high single-digit growth rate, which is what the company has talked about as the long-term growth rate for this market.
- Rainer M. Blair, CEO of Danaher Corp, stated that the recovery in bioprocessing is well underway and that the company is seeing positive development in nearly every category of the bioprocessing portfolio. He mentioned that the guide for 2023 is 6% to 7% core growth on a quarterly basis, and that the company expects to see a positive development throughout the year. He also stated that the multi-year stacks show that this is in line with a high single-digit growth rate, which is what the company has talked about as the long-term growth rate for this market.
- Analyst asked about seasonality in the bioprocessing business, specifically regarding Q1 being the lightest quarter and Q3 being lower than Q2.
- Matthew R. McGrew, CFO of Danaher Corp, stated that Q1 is typically the lightest quarter in the bioprocessing business, with a step-up in Q2 and a step-down in Q3. He mentioned that this pattern is a normal trajectory for the business and that the company sees a step-up in Q4.
- Matthew R. McGrew, CFO of Danaher Corp, stated that Q1 is typically the lightest quarter in the bioprocessing business, with a step-up in Q2 and a step-down in Q3. He mentioned that this pattern is a normal trajectory for the business and that the company sees a step-up in Q4.