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DANAHER CORP /DE/ (DHR)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered modest growth and solid execution: revenue $6.54B (+2.0% YoY), core revenue +1.0%, adjusted diluted EPS $2.14 (+2.4% YoY), and free cash flow $1.50B, with gross margin up 50 bps to 59.5% and adjusted operating margin 29.6% .
  • Biotechnology led with high single-digit core growth; Life Sciences improved modestly; Diagnostics declined 2% on China VBP and a slower respiratory season, though Cepheid respiratory revenue materially beat internal expectations ($0.55B vs. ~$0.35B) .
  • Guidance: Q1 2025 core revenue low-single-digit decline; FY 2025 core revenue ~+3%; adjusted operating margin ~26.5% in Q1 and ~28.5% for FY 2025; management expects a 2% FX headwind for 2025 .
  • Stock-relevant catalysts: accelerating bioprocess order momentum (six consecutive quarters of high-single-digit sequential growth), Cepheid installed base >60,000, and $1.9B buybacks (~8M shares) into Q1 2025; headwinds include China VBP acceleration and respiratory normalization to ~$1.7B in 2025 .

What Went Well and What Went Wrong

  • What Went Well

    • Sustained bioprocessing recovery: “six consecutive quarters of high single-digit sequential order growth,” with Q4 revenues primarily driven by consumables for commercialized therapies .
    • Margin and cash flow strength: adjusted operating margin 29.6% (+90 bps YoY) and free cash flow $1.50B in Q4; FY free cash flow conversion ~135% per management .
    • Cepheid respiratory outperformed: ~$550M Q4 revenue vs internal ~$350M expectation, and installed base now >60,000 instruments globally .

  • What Went Wrong

    • Diagnostics core revenue down 2% on China VBP and slower respiratory season; Leica/Beckman strength offset by China volume-based procurement and reimbursement cuts .
    • Life Sciences caution for 2025: management guided tools low-single-digit up, but Pall and Genomics down initially; Q1 mid-single-digit decline with improvement through the year .
    • Genomics consumables softness and Aldevron behind deal model due to slower end markets; Abcam tracking close but still early .

Financial Results

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Revenue ($USD Billions)$6.41 $5.74 $5.80 $6.54
Diluted EPS (GAAP) ($)$1.50 $1.22 $1.12 $1.49
Adjusted Diluted EPS ($)$2.09 $1.72 $1.71 $2.14
Operating Cash Flow ($USD Billions)$1.59 $1.42 $1.51 $2.02
Free Cash Flow ($USD Billions)$1.16 $1.13 $1.23 $1.50
Gross Margin %59.0% (derived from $3,779/$6,405) ——59.5%
Operating Margin % (GAAP)20.9% ——21.8%
Adjusted Operating Margin %———29.6%

Note: Gross margin for Q4 2023 is calculated from disclosed values; adjusted operating margin only disclosed for Q4 2024 .

Segment Breakdown (Q4)

SegmentQ4 2023 Sales ($USD Billions)Q4 2024 Sales ($USD Billions)YoY Total Sales %Core Sales %
Biotechnology$1.76 $1.87 +6.5% +8.0%
Life Sciences$1.93 $2.03 +5.5% +1.0%
Diagnostics$2.72 $2.64 -3.0% -2.0%
Total Company$6.41 $6.54 +2.0% +1.0%

KPIs and Operational Metrics (Q4)

KPIQ4 2024Prior Quarter/Year Reference
Cepheid Respiratory Revenue ($USD Billions)~$0.55 FY ‘24 respiratory normalization discussion to ~$1.7 in 2025
Cepheid Installed Base>60,000 instruments High single-digit growth in recent quarters
Bioprocess Order MomentumSix consecutive quarters of high single-digit sequential order growth Continued improvement into Q4
Share Repurchases~8M shares, ~$1.9B (Q4 into Jan) ~28M shares over 2024–early 2025
Free Cash Flow ($USD Billions)$1.50 $1.16 (Q4 2023)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Core Revenue Growth (Non-GAAP)Q1 2025—Low-single-digit decline YoY New
Core Revenue Growth (Non-GAAP)FY 2025—~+3% YoY New
Adjusted Operating Margin %Q1 2025—~26.5% New
Adjusted Operating Margin %FY 2025—~28.5% New
FX Impact on RevenueFY 2025—~-2% headwind New
Cepheid Respiratory RevenueFY 2025~$2.0B (last two years actual) ~$1.7B (endemic) Lowered
China VBP Headwinds2024–2026~$50M per year (prior expectation) ~$200M over 2 years; $50M realized in Q4’24 Accelerated
DividendQ1 2025—$0.27 per share (payable Jan 31, 2025) New
FY 2024 Core RevenueFY 2024Down low-single digits Actual: -1.5% core, flat GAAP revenue In line/down low-single digits

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Bioprocessing recoverySustained positive momentum; better-than-expected revenue; Cepheid share gains Continued positive momentum; better-than-expected revenue High single-digit core growth; 6 consecutive quarters of sequential order growth; consumables strength Improving, sustained
Diagnostics respiratoryStrong Cepheid performance Cepheid likely gained share $0.55B revenue vs ~$0.35B expectation; FY25 endemic ~$1.7B Near-term beat; normalizing FY25
China (VBP/reimbursement)—Core strength ex-China; overall 5% core growth in Diagnostics Accelerated VBP and reimbursement cuts; ~$200M over 2 years; $50M in Q4 Worsening headwind
Life Sciences instrumentsBroad execution; modest growth Modest demand improvements; instruments slightly up Tools low-single-digit up; Pall/genomics down in early 2025; Q1 down mid-single digits Cautious near-term
AI/technology——Applying AI to accelerate assay development and digital diagnostics (Leica/Indica partnership) Expanding adoption
Regulatory/export controls——Recent export controls not meaningful; long-standing license regime Neutral
Capital deployment——~$1.9B buybacks (~8M shares) Q4–Jan; active M&A funnel; disciplined criteria Active

Management Commentary

  • Strategy and positioning: “We finished the year strong, with better-than-anticipated core revenue in all three of our segments. Good execution… drove solid cash flow and operating margin expansion.” “We believe Danaher is better positioned than at any point in our 40-year history…” .
  • Bioprocessing outlook: “Sustained positive momentum in our order book… sixth consecutive quarter of high single-digit sequential order growth… consumables drove revenue growth” .
  • Diagnostics/respiratory: “Cepheid’s respiratory revenue of approximately $550 million in the quarter exceeded our expectation of $350 million… installed base… >60,000 instruments” .
  • 2025 margin/FX framework: FY adjusted operating margin ~28.5%; ~2% revenue headwind from USD strength .
  • Capital allocation: ~8M shares repurchased for ~$1.9B across Q4 and into January 2025; active M&A pipeline with disciplined valuation/end-market criteria .

Q&A Highlights

  • Life Sciences cadence: Q1 mid-single-digit down, flattish in Q2, ramp in back half; tools up low-single-digit, Pall and genomics down initially .
  • Academic/government funding noise: Management taking prudent approach in Life Sciences given recent headlines; overall portfolio aligned to attractive secular trends .
  • China VBP and reimbursement: Accelerated late in Q4; ~$200M impact concentrated over two years vs prior ~$50M per year; informs 2025 Diagnostics guide .
  • Bioprocess growth drivers: Strong orders set up 2025; consumables back to normal at large customers; equipment improved but not fully normalized .
  • AI enablement: Accelerating assay development and digital pathology decision support; Leica–Indica partnership exemplifies AI-driven diagnostics .
  • Export controls: Recent changes not meaningful for Danaher; category long-standing license regime .
  • Share repurchases/M&A: ~$1.9B buybacks; more active deal market; disciplined criteria and improving pockets of valuation .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 was unavailable at time of writing due to API request limits; therefore, explicit vs-estimate comparisons are not shown. We will update when accessible.
  • Implication: Investors should anchor near-term revisions on the company’s disclosed core revenue/margin framework and Diagnostics respiratory normalization to ~$1.7B for FY 2025 .
  • Note: Estimates unavailable via S&P Global at time of writing.*

Key Takeaways for Investors

  • Bioprocessing recovery appears durable—orders momentum and consumables normalization support mid-high single-digit growth trajectory in 2025; equipment still lagging but improving .
  • Diagnostics normalization: Near-term beat from respiratory in Q4 but guide resets FY 2025 to endemic ~$1.7B; China VBP headwinds accelerate and weigh on growth in early 2025—watch mix and margins .
  • Margins resilient: Q4 adjusted operating margin 29.6% and FY guide ~28.5% despite Life Sciences caution and FX; DBS cost actions underpin operating leverage .
  • Cash returns and optionality: ~$1.9B buybacks (~8M shares) plus strong FCF ($1.50B in Q4) create buyback/M&A flexibility amid an increasingly active deal market .
  • Near-term setup: Q1 2025 core revenue down low-single-digit with 26.5% adjusted margin—expect estimates/tone to improve as year progresses if Life Sciences ramps and bioprocessing continues to recover .
  • Medium-term thesis: Portfolio transformation to focused life sciences/diagnostics innovator, AI-enabled product pipeline, and scale positions DHR for higher long-term growth/margin/cash flow, offset by China policy risks .
  • Trading lens: Watch incoming weekly respiratory data, China tender cadence, and bioprocess orders; any upside on Life Sciences growth or faster normalization in China could reset sentiment positively .
*Estimates unavailable via S&P Global at time of writing.