Despite a current share price pullback on lowered outlook for full-year 2019, Danaher Corporation (NYSE:DHR) beat analysts’ earnings expectations for the fifth time in as many quarters and long-term asset appreciation trend should continue.
Since losing one-third of its value in the aftermath of the 2008 financial crisis, the Danaher Corporation has delivered steady asset appreciation and the company’s share price has advanced nearly sevenfold over the past decade with minimal volatility and only a few occasional pullbacks. On October 24, 2019, the share price pulled back in early trading on revised outlook news. As of noon, the share price traded 1.5% below the closing price one day earlier.
However, prior to the most recent financial report, more than three-quarters (13) of the 17 Wall Street analysts currently covering the stock held an optimistic view of the stock’s near term outlook. Additionally, of those 13 favorable recommendations, more than half (7) were of the “Strong Buy” variety, with six “Buy” recommendations. All remaining analysts had a “Hold” recommendation.
Between early August and early October, the share price traded around the same level as its 50-day moving average and crossed the average several times in the process. Additionally, the share price has remained below the 50-day moving average steadily since October 7, 2019. Furthermore, this share price leveling has also flattened the 50-day average curve, while the 200-day average continues rising. These changes narrowed the gap between the 50-day moving average and its 200-day counterpart from nearly 16% in late July to less than 5%. Furthermore, the current share price has more than 15% room on the upside before it reaches the analysts’ current $156.69 average target price.
Before the opening bell on October 24, 2019, the Danaher Corporation released its financial results for its third quarter, which ended on September 27, 2019. Revenues in the third quarter marked a 4% year-over-year increase to $5 billion. Non-GAAP growth was slightly higher at 5%. Furthermore, excluding the company’s Dental segment — which has been spun off into its own business entity named Envista (NYSE:NVST) — core revenue growth for the third quarter 2019 was even higher at 6.0%.
The period’s net earnings attributable to Danaher common stockholders of nearly $650 million were 4.5% lower than in the same period last year and represent earnings of $0.89 per diluted share. However, the adjusted net earnings per diluted share of $1.16 were 5.5% higher than the comparable measure from the same period last year. Additionally, the $1.16 adjusted earnings beat the $1.15 analysts’ expectations by 0.9%.
Danaher’s management expects fourth-quarter 2019 net earnings per diluted share in the $1.06 to $1.09 range. Additionally, the forecast for the adjusted net earnings per diluted share is between $1.32 and $1.35 for the last quarter of the year. In the revised outlook for full-year 2019, the company narrowed its diluted net earnings per share range from between $3.38 and $3.43 to between $3.38 to $3.41. The adjusted net earnings per diluted share forecast for the full year is between $4.74 and $4.77.
“We are pleased by our strong third-quarter performance as we delivered another quarter of 5% core revenue growth and solid margin expansion. We believe our ongoing investments in innovation and commercial initiatives helped to continue building sustainable competitive advantages across a number of our businesses,” stated the company’s President and Chief Executive Officer Thomas P. Joyce, Jr. “We remain encouraged by our performance and are excited about the opportunities ahead. We believe our differentiated portfolio and the power of the Danaher Business System position us well through the end of 2019 and beyond,” concluded Joyce.
Affected by the overall market correction in late 2018, the share price entered the trailing 12-month period with a 1% pullback. However, after reaching its 52-week low of $94.85 on December 24, 2018, the share price resumed its steep uptrend. The share price advanced nearly 55% between the December 2018 low and its new all-time high of $146.76 on September 20, 2019.
After peaking in September, the share price pulled back to close at the end of trading on October 23, 2019, at $138.45. While 5.5% below the September peak, the Oct. 23 closing price was still 44.5% higher than it was one year earlier, 46% above the 52-week low from December 2018 and more than 120% above the price level from five years ago.
While miniscule compared to the one-year asset appreciation, the current 0.5% dividend yield pushed the total one-year return above the 45% mark. Over the past three years, total returns were nearly 75%. Additionally, the company’s long-term investors have more than doubled their investment with a total return in excess of 140%.
Danaher Corporation (NYSE:DHR)
Headquartered in Washington, District of Columbia, the Danaher Corporation designs, manufactures and markets professional, medical, industrial and commercial products and services. Originally formed in 1969 as DMG, Inc., the company operated as Diversified Mortgage Investors, Inc. from 1978 until 1984, when it changed its name to Danaher Corporation. In 2019, the Danaher Corporation divested its Dental segment into a separate business entity and offer products and services through its three remaining segments.
The Life Sciences segment provides cellular analysis, lab automation and centrifugation instruments, as well as mass spectrometers and microscopes. Additionally, this segment also offers filtration, separation and purification technologies to the biopharmaceutical, food and beverage, medical, aerospace, microelectronics and other industrial sectors. The Diagnostics segment offers chemistry, immunoassay, microbiology and automation systems, as well as hematology and molecular diagnostics products. Furthermore, this segment provides analytical instruments, reagents, consumables, software and services for hospitals, physicians’ offices, laboratories and other medical facilities. Lastly, the Environmental & Applied Solutions segment offers instrumentation, services and disinfection systems used to analyze, treat and manage water in residential, commercial, industrial and natural resource applications.
Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.