Here's Why Shares in Danaher Got Boosted Higher Today
Key Points
Danaher's biotechnology growth prospects look assured.
Guidance for 2026 is merely within the range of current market expectations.
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Shares in biotechnology, life sciences, and diagnostics company Danaher (NYSE: DHR) rose by as much as 12.9% in early morning trading today. The move follows a well-received third-quarter earnings report, which saw the company beat its own and the market's expectations.
What happened in Danaher's third quarter
Having forecast core revenue growth in the low-single-digit range and an adjusted operating profit margin of 25.5% for the third quarter on its second-quarter earnings call, management was pleased to announce core revenue growth of 3% and an adjusted operating profit margin of 27.9% for the third quarter.
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Management put the outperformance down to "DBS-driven execution paired with continued momentum in our bioprocessing business and better-than-anticipated respiratory revenue at Cepheid." DBS refers to the Danaher Business System (a management system emphasizing continuous improvement). Danaher's bioprocessing business continues on a strong growth path, driven by increasing production and research into biologics, notably monoclonal antibodies.
As for the better-than-expected growth at Cepheid (its diagnostics segment), CEO Rainer Blair said, "Customers began purchasing earlier than typical in preparation for the upcoming respiratory season," in other words, Danaher benefited from a pull-forward in revenue driven by the flu season.
Image source: Getty Images.
What it means for investors
While a good set of results is always positive, the market may have overreacted to this news. Management's preliminary guidance for 2026 calls for core revenue growth of 3% to 6% (a pretty wide range at the best of times) and no more than high-single-digit earnings growth. That encompasses what the market was expecting before these earnings, with biotechnology offsetting modest growth in life sciences, and uncertainty around the diagnostics segment's exposure to China. That's fair enough, but with the stock trading at almost 29 times the estimated 2025 earnings, it might not be enough to take the stock significantly higher from here.
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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Danaher. The Motley Fool has a disclosure policy.
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