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DANAHER CORP /DE/ (DHR)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025: Revenue $5.741B, adjusted EPS $1.88, and free cash flow $1.06B, with core revenue flat YoY; Bioprocessing core growth +7% offset weaker Life Sciences (-4%) and Diagnostics (-1.5%) .
  • Results beat S&P Global consensus: Revenue $5.5899B* and EPS $1.64* vs actual $5.741B and $1.88; strength came from bioprocessing consumables and stronger-than-anticipated respiratory demand at Cepheid .
  • Guidance: FY 2025 core revenue growth ~3% maintained; new FY adjusted EPS guidance $7.60–$7.75; Q2 core growth low-single digits and adjusted operating margin ~25.5% .
  • Key catalysts: sustained bioprocessing order momentum (7th straight sequential order increase; book-to-bill >1), measured China stimulus, and proactive tariff offsets (surcharges, footprint adjustments). Management retains conservative posture given policy uncertainty .

Values retrieved from S&P Global.*

What Went Well and What Went Wrong

What Went Well

  • Bioprocessing strength: Core growth +7% with low double-digit consumables growth; orders up sequentially for the seventh consecutive quarter, book-to-bill “solidly over 1” .
  • Cepheid outperformance: Respiratory revenue exceeded expectations and non-respiratory virology grew mid-teens; U.S. MVP vaginitis panel up ~40% YoY .
  • Cash generation and margin quality: Free cash flow $1.06B; gross margin expanded 100 bps YoY to 61.2% as DBS-driven productivity and mix supported profitability .
    Quote: “Our first quarter revenue, earnings and cash flow all came in ahead of our expectations… continued momentum in bioprocessing and higher-than-anticipated respiratory demand” — Rainer M. Blair .

What Went Wrong

  • Life Sciences softness: Instruments down low single digits amid U.S. academic/government weakness; full-year Life Sciences outlook revised to flat from prior low-single-digit growth .
  • China Diagnostics headwinds: VBP and reimbursement changes drove a high-single-digit decline in China, weighing on Diagnostics (-1.5% core); VBP cadence tracking ~$50M/$50M/$30M/$15–$20M .
  • Adjusted operating margin down 50 bps YoY to 29.6% due to productivity investments and normalizing Cepheid respiratory mix; equipment revenues still subdued though funnels improved .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Billions)$5.798 $6.538 $5.741
Adjusted EPS ($USD)$1.71 $2.14 $1.88
Gross Margin (%)58.7% 59.5% 61.2%
Adjusted Operating Margin (%)27.5% 29.6% 29.6%
Free Cash Flow ($USD Billions)$1.20 $1.504 $1.060

Segment growth (YoY, Q1 2025):

SegmentGAAP Sales Growth YoY (%)Core Sales Growth YoY (%)
Total Company(1.0)% 0.0%
Biotechnology+6.0% +7.0%
Life Sciences(3.5)% (4.0)%
Diagnostics(3.0)% (1.5)%

KPIs (Q1 2025 highlights):

  • Free cash flow to net income conversion >110% .
  • Diluted shares outstanding: 720.8M .
  • Operating cash flow: $1.299B; Capex: $245M .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Core Revenue Growth (non-GAAP)FY 2025~3% ~3% Maintained
Adjusted Diluted EPSFY 2025N/A$7.60–$7.75 Initiated
Core Revenue Growth (non-GAAP)Q2 2025N/ALow-single digits Initiated
Adjusted Operating MarginQ2 2025N/A~25.5% Initiated
Life Sciences Segment OutlookFY 2025Low-single-digit growth (tools up LSD; Pall/genomics down) Flat Lowered
Respiratory Revenue (Cepheid)Q2 2025N/A~$250M Provided
DividendNext paymentPrior trend$0.32 per share payable July 25, 2025 Maintained regular quarterly dividend

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q3 2024)Previous Mentions (Q-1: Q4 2024)Current Period (Q1 2025)Trend
Bioprocessing orders and recovery5th consecutive sequential order improvement; book-to-bill ~1.0 High single-digit sequential orders; 6th consecutive improvement; exit-rate HSD 7th consecutive sequential orders; book-to-bill >1; FY 2025 bioprocess guide raised to HSD Improving steady
Life Sciences instruments demandCapital equipment constrained; consumables/service growth; China stimulus awaited Life Sciences tools modestly better; Q1 down mid-single digits expected U.S. academic/government softness; full-year outlook now flat More cautious
China (Stimulus & VBP)Stimulus not yet meaningful; Diagnostics China down low double digits; VBP rising VBP accelerated late Q4; total impact ~$200M over two years vs prior $150M/3yrs; respiratory normalization Declines driven by VBP/reimbursement; stimulus “measured” in tools Headwinds persisting
Cepheid RespiratoryQ3 respiratory ~$425M (beat); full-year 2024 ~$1.7B Q4 respiratory ~$550M (beat); endemic assumption $1.7B Q2 respiratory guide ~$250M; Q1 above expectations; non-respiratory virology mid-teens Seasonality normalizing
Tariffs & MacroMonitoring; no major impact quantified Post-election/policy noise; cautious posture Several hundred million gross impact (~$350M); offsets via surcharges, footprint, supply chain Manageable with offsets
AI/Technology initiativesPathology AI partnership; DxC 500i launch AI to accelerate R&D and diagnostics; AI-powered pathology Mosaic spectral flow, oncology applications; new bioreactor formats Ongoing launches
Capital Deployment & M&ABuyback completed; valuations elevated ~8M shares repurchased into Q1; funnels active; disciplined M&A Optionality emphasized; potential to be “aggressive” if assets free up Ready but disciplined

Management Commentary

  • “More than 80% of our revenues are recurring, the majority of which are consumables… specified into regulated manufacturing processes or specific to the equipment that we supply.” — Rainer M. Blair .
  • “Orders increased sequentially for the seventh consecutive quarter… Revenue growth led by low double-digit consumables” — Rainer M. Blair (Bioprocessing) .
  • “We can largely offset the impact from these tariffs through supply chain adjustments, surcharges, manufacturing footprint changes, and other cost actions.” — Rainer M. Blair .
  • “Adjusted EPS guidance offers the best anchor point… in a dynamic environment” — Rainer M. Blair .
  • “Of the $150M cost savings, we achieved about $50M in Q1… remaining ~$100M is cushion” — Matt McGrew .

Q&A Highlights

  • Tariffs: Gross headwind framed at ~$350M for the rest of 2025; offsets include surcharges, cost actions, and manufacturing rebalancing; potential for more aggressive actions if needed .
  • VBP cadence: Q1 China VBP impact in line; cadence remains ~$50M/$50M/$30M/$15–$20M .
  • Cost savings: $150M program; ~$50M captured in Q1, remainder modeled evenly with slight Q3 skew; retained as cushion in EPS guide .
  • Life Sciences outlook cut: Full-year revised to flat due to U.S. academic/government softness; direct NIH <1% of revenue; global government/academic low-single digits .
  • Respiratory seasonality: Q2 guide ~$250M; step-down from Q1 consistent with normal seasonality observed last year .
  • Aldevron/genomics: Pressure at two large customers continues; expected to improve in H2 as comps ease .

Estimates Context

MetricQ3 2024Q4 2024Q1 2025
Revenue Consensus Mean ($USD Billions)$5.5888*$6.4929*$5.5899*
Revenue Actual ($USD Billions)$5.798 $6.538 $5.741
Primary EPS Consensus Mean ($USD)$1.5697*$2.1643*$1.6436*
Adjusted EPS Actual ($USD)$1.71 $2.14 $1.88
  • Q1 2025: Revenue and EPS beat consensus; Q4 EPS slightly below; Q3 beat on both. Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Bioprocessing recovery is broadening, anchored by consumables strength and seven consecutive quarters of order growth; equipment remains lumpy but funnels are improving .
  • Diagnostics face China VBP and reimbursement headwinds, but Cepheid continues to gain share, with robust non-respiratory growth and normalizing respiratory seasonality .
  • Guidance prudent: FY core growth ~3% maintained; new adjusted EPS guide $7.60–$7.75 provides an anchor amid tariff and policy uncertainty .
  • Tariff mitigation is credible (surcharges, supply-chain/footprint actions), limiting P&L volatility and supporting margin resilience despite temporary mix pressures .
  • Life Sciences outlook lowered to flat due to U.S. academic/government demand softness; strength in pharma/clinical/applied and easing comps may support H2 stabilization .
  • Capital allocation optionality is high; management highlights readiness to pursue attractive M&A should opportunities emerge while maintaining discipline .
  • Near-term: Expect Q2 margin step-down with respiratory seasonality; medium-term: recovery drivers (bioprocessing activity, measured China stimulus, product launches) underpin the thesis .

Appendix: Additional Q1 2025 Press Releases

  • Regular quarterly cash dividend of $0.32 per share, payable July 25, 2025; record date June 27, 2025 .
  • Q1 press release headline results and non-GAAP reconciliations; segment growth rates; cash flow details .
  • 8-K furnishing Q1 press release (Item 2.02) and exhibit 99.1 .