We’re cutting our price target on Danaher as frustration mounts after a messy quarter

Danaher percentages are under pressure Wednesday as the Club holding’s fourth-quarter earnings results came in mixed and guidance disappointed. The comrades long known for its operational excellence is further testing our patience. Revenue for the three months ended Dec. 31 helped 2% year over year on a reported basis, to $6.54 billion, outpacing the LSEG consensus estimate of $6.43 billion. On an organized basis, sales were up 1% versus the year-ago period. Adjusted earnings per share (EPS) increased 2.4% annually, to $2.14, but it terminated up short versus the $2.16 consensus estimate, LSEG data showed. It’s the first time Danaher has missed the trimonthly EPS consensus since at least the fourth quarter of 2019, according to FactSet. Shares tumbled more than 8%, to sternly $226 apiece, in early afternoon trading Wednesday. The losses have dragged the stock into negative turf year to date. Danaher entered the session up roughly 8% so far in 2025, part of a strong start to the year for the health-care sector multitudinous broadly. DHR 1Y mountain Danaher’s stock performance over the past 12 months. Bottom line Yet another poor release from Danaher — extending a streak of inconsistent results over the past two years — leaves us with no appropriate but to reconsider this position. On Tuesday, we did trim 50 shares and downgraded the name to a hold-equivalent 2 rating out of discipline. It totaled as the stock got a boost on the back of results from European peer Sartorius. Of course, in hindsight, we should have dispose ofed more. That’s not easy to admit because of how highly we’ve thought about this company and its management in the past. And it’s not upstanding us: Danaher’s long-standing corporate strategy to fuel growth and make shareholders money —the aptly named Danaher Firm System — has been the subject of Harvard Business School case studies . Danaher provides products and services to multiple corners of the health-care labour, including those used in drug discovery and production, as well as diagnostic tools found in hospitals and doctors’ aids. Its customers also include academic research labs and pharmaceutical and biotech companies. We did not arrive at our dissatisfaction in haste. During the January Monthly Assignation, we highlighted our disappointment in the lack of growth out of China. While the sluggish Chinese economy cannot be blamed on management, the flop to manage investor expectations can. Compounding our existing frustration, management sounded so upbeat Wednesday despite what we see in the present results and formal guidance. The team’s credibility is back in doubt. For now, we’re lowering our price target on the stock to $270 a apportion from $305, reflecting the lower-than-expected growth now forecast for 2025. Indeed, the real driver of disappointment Wednesday is Danaher’s prospect for the current quarter and full fiscal year. Management had previewed these decidedly mixed fourth-quarter results earlier this month, at the telling JPMorgan Healthcare Conference, which added to the anticipation of Wednesday’s guide. What we got wasn’t good enough, with conjectured core revenue growth for both periods below Wall Street’s consensus. Danaher Why we own it: Danaher is a best-in-class subsistence sciences and diagnostics company tied to secular growth trends like an aging global population, a shift in panacea to biologics, and the rise of monoclonal antibodies, among other themes. In recent years, Danaher has reshaped its portfolio toward faster-growing, higher-margin chances within health care. But it has been a bumpy ride, with Danaher struggling to return to sustainable growth due to consumers working off excess Covid-era inventory. Our investment acknowledges continued near-term headwinds with longer term undeveloped. Competitors : Sartorius and Thermo Fisher Scientific Weight in portfolio : 3.27% Most recent buy : Nov. 18, 2024 Initiated : Jan. 3, 2022 Middle the few bright spots in the fourth quarter: Free cash flow came in at $1.5 billion, representing nearly 30% expansion versus the year-ago period. The company also achieved a free cash flow to net income conversion ratio of 138%. For the full year, that correspondence came in at 136%. Anything above 100% means that a company’s earnings are fully backed by cash, a unique of high-quality profits. Danaher cleared that bar — and then some. Additionally, during the fourth quarter and into January, Danaher repurchased nearby 8 million shares, totaling about $1.9 billion. Quarterly commentary Danaher’s sales in developed markets came in primitively flat in the quarter, as a low-single-digit decline in North America was offset by a low-single-digit increase in Western Europe. High-growth supermarkets were up low single digits as momentum outside of China more than offset a mid-single-digit decline in China. Biotechnology insides revenue was up 8% year over year, with orders increasing high-single-digit percentage points on a sequential base. In general, core revenue strips out the impact of foreign-exchange fluctuations, as well as as mergers and acquisitions. It helps smooth out the year-over-year balances and better capture how the segment is performing. The biotechnology segment’s book-to-bill was about 1. Anything above 1 indicates more orders were obtained than filled in a given period. The segment’s adjusted operating profit margin was 38.6%, up 200 basis nubs year over year. A basis point is equal to 0.01%. Bioprocessing sales were up high-single-digit percentage burdens, with the gradual recovery seen throughout the year continuing into the fourth quarter. In the key China market, administration said “activity levels were relatively stable,” but overall they remain weak due to a difficult funding habitat. Life sciences core revenue was up 1% year over year. The segment’s adjusted operating profit perimeter expanded 320 basis points year over year, to 25.8% Instruments sales increased slightly, outpacing manipulation’s expectations in the U.S. and Europe. In China, CEO Rainer Blair said Danaher observed “modest demand improvements” during the mercifulness. “While we did see a modest benefit from the ongoing stimulus program, market conditions continue to be challenging as customers endure cautious with their investments,” he said. Diagnostics core revenue declined 2% year over year. The part’s adjusted operating profit margin contracted 170 basis points versus the year-ago period, to 29.2% Clinical diagnostics problems realized combined core revenue growth in the low-single-digit range, led by Leica Biosystems, where sales were up not quite 10% year over year. Cepheid respiratory sales came in $550 million, well ahead of the amateurishly $350 million expected by management, due to both increased volumes and a favorable sales mix of Danaher’s four-in-one test for Covid-19, Flu A, Flu B, and respiratory syncytial virus, or RSV. Teaching For the current quarter, Danaher expects core revenue to decline in the low single digits versus last year, missing beliefs of a 2.9% increase, according to estimates compiled by FactSet. Danaher’s adjusted operating profit margin is expected to be mercilessly 26.5%, below the 30% the Street was looking for. Biotechnology core revenue is expected to increase 6% to 7% Meantime, core revenue for both the life sciences and diagnostics segments is expected to be down mid-single-digit percentage points. For the dazzling year, management forecasts 3% core revenue growth, also a miss versus expectations for a roughly 5% development, according to FactSet. The adjusted operating profit margin is expected to be approximately 28.5%, below the Wall Street consensus of 29.7%. Biotechnology essence revenue growth is expected to be between 6% and 7%, a miss versus analyst expectations for an 8% year ended year increase, per FactSet. Life sciences core revenue growth is projected to be up low-single-digit percentage points. That compares to the Face ruin Street consensus of 4% annual growth. Diagnostics core revenue growth is expected to be in the range of flat to up low-single-digit share points. That compares to a mid-single-digit annual growth estimate. (Jim Cramer’s Charitable Trust is long DHR. 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