Diversified science and technology company Danaher (NYSE:DHR) beat Wall Street’s revenue expectations in Q4 CY2024, with sales up 2.1% year on year to $6.54 billion. Its non-GAAP profit of $2.14 per share was 1.3% below analysts’ consensus estimates.
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Danaher (DHR) Q4 CY2024 Highlights:
- Revenue: $6.54 billion vs analyst estimates of $6.43 billion (2.1% year-on-year growth, 1.6% beat)
- Adjusted EPS: $2.14 vs analyst expectations of $2.16 (1.3% miss)
- Adjusted EBITDA: $2.12 billion vs analyst estimates of $2.12 billion (32.4% margin, in line)
- Operating Margin: 21.8%, in line with the same quarter last year
- Free Cash Flow Margin: 23%, up from 19% in the same quarter last year
- Organic Revenue rose 1.6% year on year (-11.5% in the same quarter last year)
- Market Capitalization: $160.4 billion
Rainer M. Blair, President and Chief Executive Officer, stated, "We finished the year strong, with better-than-anticipated core revenue in all three of our segments. Good execution by our team also drove solid cash flow and operating margin expansion."
Company Overview
Started as a real estate investment trust, Danaher (NYSE:DHR) designs and manufactures professional, medical, industrial, and commercial products and services.
Research Tools & Consumables
The life sciences subsector specializing in research tools and consumables enables scientific discoveries across academia, biotechnology, and pharmaceuticals. These firms supply a wide range of essential laboratory products, ensuring a recurring revenue stream through repeat purchases and replenishment. Their business models benefit from strong customer loyalty, a diversified product portfolio, and exposure to both the research and clinical markets. However, challenges include high R&D investment to maintain technological leadership, pricing pressures from budget-conscious institutions, and vulnerability to fluctuations in research funding cycles. Looking ahead, this subsector stands to benefit from tailwinds such as growing demand for tools supporting emerging fields like synthetic biology and personalized medicine. There is also a rise in automation and AI-driven solutions in laboratories that could create new opportunities to sell tools and consumables. Nevertheless, headwinds exist. These companies tend to be at the mercy of supply chain disruptions and sensitivity to macroeconomic conditions that impact funding for research initiatives.
Sales Growth
A company’s long-term performance is an indicator of its overall quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for years. Unfortunately, Danaher’s 5.9% annualized revenue growth over the last five years was mediocre. This fell short of our benchmark for the healthcare sector and is a tough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. Danaher’s history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 5.3% annually. 
We can dig further into the company’s sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Danaher’s organic revenue averaged 5.4% year-on-year declines. Because this number aligns with its normal revenue growth, we can see the company’s core operations (not acquisitions and divestitures) drove most of its results. 
This quarter, Danaher reported modest year-on-year revenue growth of 2.1% but beat Wall Street’s estimates by 1.6%.
Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months. Although this projection indicates its newer products and services will fuel better top-line performance, it is still below average for the sector.
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Adjusted Operating Margin
Danaher has been a well-oiled machine over the last five years. It demonstrated elite profitability for a healthcare business, boasting an average adjusted operating margin of 31.5%.
Analyzing the trend in its profitability, Danaher’s adjusted operating margin rose by 2 percentage points over the last five years. Zooming into its more recent performance, however, we can see the company’s margin has decreased by 5.2 percentage points on a two-year basis. If Danaher wants to pass our bar, it must prove it can expand its profitability consistently.
This quarter, Danaher generated an adjusted operating profit margin of 29.6%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Danaher’s EPS grew at a remarkable 11.1% compounded annual growth rate over the last five years, higher than its 5.9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Diving into the nuances of Danaher’s earnings can give us a better understanding of its performance. As we mentioned earlier, Danaher’s adjusted operating margin was flat this quarter but expanded by 2 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.
In Q4, Danaher reported EPS at $2.14, up from $2.09 in the same quarter last year. Despite growing year on year, this print slightly missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects Danaher’s full-year EPS of $7.48 to grow 8%.
Key Takeaways from Danaher’s Q4 Results
We enjoyed seeing Danaher exceed analysts’ organic revenue expectations this quarter, signaling that the COVID destocking headwind could be in the rearview mirror. On the other hand, its EPS slightly missed. Overall, this quarter had some key positives. The stock traded up 1% to $225.35 immediately after reporting.
Is Danaher an attractive investment opportunity right now? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.