Danaher shares fell on Tuesday at the same time as the life sciences company brought its key bioprocessing business back to growth within the third quarter. Danaher's revenue rose 3% to $5.8 billion on a reported basis within the three months ended Sept. 27 from the identical period last 12 months, 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 response doesn’t reflect the progress Danaher has made on this vital end market, which is included in the corporate's biotechnology segment. Some of Tuesday's weakness is also as a result of profit-taking, as Danaher shares jumped on solid results from German life sciences company Sartorius last week. Bioprocessing is using cellular components to provide a wide range of products, including targeted therapies. Danaher is a frontrunner in services and products 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 goal 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” within 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 seek out recent avenues for growth. We expect there will probably be a turnaround in bioprocessing orders this 12 months as biotech funding picks up and bigger 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 money flow was higher than expected at $1.23 billion, representing growth of nearly 12% % in comparison with the identical period last 12 months. The company also achieved a free money flow to net income ratio of 150%. Since the start of the 12 months, this ratio has been 135%. This implies that the corporate's earnings are fully backed by money and are of a better quality than earnings without the identical or greater amount of money. 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 within the third quarter, but beat estimates. Bioprocessing reported low single-digit growth within the quarter. Bioprocessing has been under pressure in recent quarters as smaller corporations lacked financing following the collapse of Silicon Valley Bank in early 2023 and destocking at larger customers as a result of 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 within the [biotech] Due to the financing environment, they proceed to rationalize their therapeutic programs and remain cautious of their investments.” that “the announced stimulus measures in China haven’t yet resulted in significant order activity as customers are still waiting for details on the implementation of those 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. 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Danaher Shares fell on Tuesday at the same time as the life sciences company brought its key bioprocessing business back to growth within the third quarter.
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