Danaher shares fell on Tuesday even though the life sciences company regained growth in its key bioprocessing business in the third quarter. Danaher's revenue for the three months ended Sept. 27 advanced 3% year-over-year as reported to $5.8 billion, beating the LSEG consensus estimate of $5.59 billion. In organic terms, sales increased by 0.5%. Adjusted earnings per share declined 0.6% year over year to $1.71, but still beat the expected $1.57 per share. DHR YTD mountain Danaher YTD shares fell 4% as investors questioned the sustainability and magnitude of improvements in bioprocessing in 2025. Wall Street's reaction does not reflect the progress made by Danaher in that important end market, which is contained in the company's biotechnology segment. Some of Tuesday's weakness could also be attributed to profit-taking, as Danaher shares rose on the back of strong results last week from its German life sciences peer Sartorius. Bioprocessing is the use of cellular components to manufacture a variety of products including targeted therapies. Danaher is a leader in products and services that support healthcare research and development. Simply put, Danaher's declining stock presents a buying opportunity, and we are upgrading it to our 1-equivalent Buy rating and increasing our price target to $305 per share from $295. As the long-standing headwind from stock drawdowns eased, demand from large bioprocessing customers improved. However, bioprocessing in China remained suppressed. Management said a recovery there could take “more time” in the near term. In addition to better-than-expected biotech sales, Danaher's life sciences and diagnostics segments were also strong. Danaher Why We Own: Danaher is a best-in-class diagnostics and life sciences company, with a management team that has proven time and time again its ability to find new ways to grow. We expect to see a turnaround in bioprocessing-related orders this year as biotech financing becomes available again and larger customers reduce their efforts to clear excess Covid-era inventory. Competitors: Sartorius and Thermo Fisher Scientific Portfolio Weight: 4.6% Most Recent Purchase: July 2, 2024 Started: January 3, 2022 Free cash flow was better than expected at $1.23 billion, representing a growth of almost 12% compared to the same period of the previous year. The company also achieved a free cash flow to net income conversion ratio of 150%. So far this year, that ratio stands at 135%. That means your profits are fully backed by cash, and then some, and are of higher quality than profits without an equal or greater amount of cash on hand. During the third quarter, management repurchased about 2.6 million shares. Comment Biotechnology segment sales in the third quarter fell 0.7% on a base basis to $1.65 billion, but beat estimates. Bioprocessing posted single-digit growth in the quarter. Bioprocessing has been under pressure in recent quarters due to a lack of funding for smaller companies following the collapse of Silicon Valley Bank in early 2023 and the destocking of larger clients following the Covid pandemic. On the post-earnings conference call, Danaher CEO Rainer Blair said: “We're not seeing the same level of [large customer] improvement in the underlying performance of our smaller clients. Despite a modest improvement in [biotech] financing environment, continue to rationalize their therapeutic programs and remain cautious with their investments.” Life sciences segment sales were better than expected, but still fell 2% on a basis basis to $1.78 billion. China remained a hurdle, as Blair said on the call. that “the stimulus measures announced in China have not yet translated into significant order activity, as customers are still awaiting details on the implementation of these programs outside of China.” , demand is still somewhat muted, but Diagnostics segment sales are expected to increase 5% on a base basis to $2.36 billion and exceeded estimates At the subsidiary Cepheid, which handles molecular diagnostics, the team highlighted. “broad-based strength” in both the respiratory and non-respiratory parts of the business. Respiratory revenue of $425 million more than doubled management's. expectations due to higher volumes and a favorable combination of its 4-in-1 test for Covid-19, influenza A, influenza B and respiratory syncytial virus (RSV). Guidance For the current quarter, the fourth quarter of fiscal 2024, Danaher expects a low-single-digit revenue decline compared to last year, on a basic basis. That's a mistake. According to FactSet, an increase of 2.6% was expected. For the full year, management's forecast remained unchanged. The team expects total sales to decline by single digits compared to expectations for a 0.5% drop. (Jim Cramer's Charitable Trust has a long DHR. See here for a full list of stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable fund's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, TOGETHER WITH OUR DISCLAIMER. NO FIDUCIARY OBLIGATION OR DUTY EXISTS OR IS CREATED BY VIRTUE OF THE RECEIPT OF ANY INFORMATION PROVIDED IN RELATION TO THE INVESTMENT CLUB. NO SPECIFIC RESULTS OR BENEFITS ARE GUARANTEED.
In this photo illustration, the Danaher Corporation logo is seen on a tablet.
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Danaher Shares fell Tuesday even though the life sciences company returned growth to its key bioprocessing business in the third quarter.
