Tuesday, August 12, 2014

Is it Time to Buy Danaher Corp?

Unfortunately, Danaher Corp unveiled a second-quarter set of results that only sought to prove how choppy the global economic recovery has been. Its earnings were mixed, with its life science operations notably outperforming other industrial areas -- in common with what Pall Corporation  has been reporting. Moreover, the two principal areas of weakness should sound a note of caution to other investors.


Danaher Corp. saw weakness in its communications results -- test and measurement segment. This doesn't bode well for Agilent Technologies. Also, dental consumables sales disappointed; they looked more promising in the previous quarter. This isn't a good sign for dental distributor Patterson Companies, Inc..


Danaher Corp. disappointsGoing into the second quarter, investors had some cause for optimism. After all, in the first quarter, the company had recorded core revenue growth of 3.5% -- at the high end of its full-year forecast of 2%-4% core revenue growth. However, the second quarter saw core revenue growth slow to 3%.
In addition, Danaher Corp. saw margin growth held back by some setbacks in its communications and dental consumables businesses. Readers can see how this affected profit growth in the following chart.


Source: Danaher Corp. Presentations


In fact, the issues spoiled Danaher's otherwise excellent record of segmental operating margin expansion.


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