Danaher (NASDAQ: DHR) The stock today announced its second quarter results, ending July 1, 2022. And DHR’s stock price is rising accordingly.
Danaher reported second-quarter 2022 adjusted earnings per share (EPS) of $2.76, up 12% year-over-year. This beats the FactSet consensus of $2.35 by 17.5%.
Meanwhile, revenue rose 7.5% year-over-year to $7.75 billion, beating FactSet’s consensus estimate of $7.29 billion by 6%. And operating cash flow reached $2 billion, while non-GAAP free cash flow reached $1.7 billion.
Rainer M. Blair, President and CEO, said:
We are pleased with our strong start to 2022. Our teams performed well in a challenging environment to deliver single-digit base revenue growth, double-digit adjusted earnings per share growth and $2 billion in cash flow. operating cash. We were particularly encouraged by the single-digit growth in our core business and believe we have gained market share across the portfolio.
Danaher is comprised of high quality franchises in attractive end markets with significant recurring revenue and sustainable business models. We believe the combination of our strong portfolio and talented team, all powered by the Danaher Business System, provides a strong foundation in today’s dynamic operating environment and positions us well for the remainder of 2022 and beyond. of the.
What is Danaher?
Danaher Inc. (NASDAQ: DHR) is a medical company operating in life sciences, diagnostics, and environmental and applied solutions. This Fortune 500 global science and technology innovator is committed to helping customers solve complex challenges while improving the quality of life around the world.
Danaher has a portfolio of world-class brands and holds leading positions in the healthcare, environmental and applied end markets. With more than 20 operating companies, Danaher’s globally diverse team includes approximately 80,000 associates.
The company was founded by Steven M. Rales and Mitchell P. Rales in 1984 and is based in Washington, DC.
How does Danaher make money?
Danaher makes money in three main areas: life sciences, diagnostics, and environmental and applied solutions. In each of these sectors, the company has several independent businesses, all of which contribute to total sales.
In the second quarter, the Life Sciences division contributed $3.9 billion in sales. Diagnostics contributed $2.5 billion in sales, while environmental and applied solutions contributed $1.2 billion in sales.
Life Sciences operating margin declined 100 basis points due to acquisitions. Diagnostics operating margin gained 340 basis points and Environmental & Applied Solutions gained 70 basis points.
Danaher Stock Financials
Danaher stock has a price/earnings ratio (P/E) of 29.6, compared to the industry average of 1. Its price/book value (P/BV) is 4.3, higher than the industry average of 1. DHR Stock offers shareholders a dividend yield of 0.4%.
DHR’s share price is down 14% year-to-date.
During the second quarter of 2022, Danaher’s overall revenue increased 7.5% year-over-year. And in the six months ended July 1, 2022, overall revenue grew 9.5%. The impact of foreign exchange reduced revenues by 3.5%.
DHR stock price growth potential
A large part of Danaher’s growth strategy is based on mergers and acquisitions (M&A). The company has announced no less than ten acquisitions in 2021, exceeding $10 billion in value.
Danaher has acquired hundreds of companies since 1984. Notable additions to Danaher’s portfolio in recent years include Cepheid, Integrated DNA Technologies, AVT and Pall.
During the six months ended July 1, 2022, Danaher acquired two businesses for total consideration of $77 million cash, net of cash. The businesses complement existing units in its Life Sciences and Environmental and Applied Solutions segments. In each case, the total annual sales of these two businesses at the time of acquisition were $7 million.
Interestingly, more than 50% of Danaher’s total revenue today was earned over the past seven years.
The company always strives for a good fit, ensuring that quality and strategic value come first. It targets innovative science and technology companies whose activities will benefit from the Danaher Enterprise System (DBS).
Danaher has posted eight straight years of dividend growth. So while 0.4% isn’t a particularly impressive dividend yield, at least investors can be reassured that the company is committed to paying it.
Danaher Stock Risks
Danaher is a massive company affected by many global challenges that investors should keep in mind.
Healthcare is a notoriously competitive industry, and the industry is going through a period of significant change.
COVID-19 continues to pose risks to parts of Danaher’s business and its financial statements.
Being such a large company with a global footprint, inflation and supply chain challenges are also a concern.
A strong dollar can weaken foreign currencies and hurt earnings in some jurisdictions.
These are just some of the current concerns. Investors should also consider risks such as adverse weather conditions, computer malfunctions or hacking, regulatory compliance and mergers and acquisitions risks.
The war in Ukraine is affecting businesses around the world, and Danaher is no exception.
Danaher suspended sanctions-prohibited sales and suspended shipments of products to Russia, except products to diagnose and treat patients and produce vaccines and therapeutics.
In the first quarter of 2022, Danaher recorded a pretax charge of $43 million, primarily related to impairment of accounts receivable and inventory and accrued liabilities for contractual obligations related to Russian operations. The company continues to monitor the military, social, political, regulatory and economic environment in Ukraine and Russia and will consider further action as appropriate.
Should you invest in Danaher stocks?
As a $200 billion company, Danaher shares are unlikely to go bankrupt. However, its current valuation is potentially high. Nevertheless, its size and varied sources of income give it weight. Life sciences is a booming growth area, and Danaher stands to benefit.
While the company has grown steadily through mergers and acquisitions, it is also quick to divest any companies that drag it down.
Last year, Danaher brought in $29.5 billion in revenue. About 75% of that revenue is recurring, which provides stability and is something investors love to see.
There are several risks to investing in Danaher shares, as noted above. Given the uncertainty present in the current stock market environment, potential shareholders should consider all eventualities before rushing to buy Danaher stock.
Nonetheless, broker consensus at FactSet gives DHR stock an overweight rating with a stock price target of $318.35.
Cowen & Co analyst Daniel Brennan reiterated his buy rating on Danaher stock with a stock price target of $343 on July 21. Meanwhile, RBC Capital Markets analyst Deane M Dray reiterated his DHR stock price target of $301 on Danaher stock.