Danaher Corporation DHR has failed to impress investors with its recent operational performance due to softness in the Life Sciences segment. Also, increasing expenses are likely to impede the company’s earnings in the quarters ahead.
Danaher is a global conglomerate that designs, manufactures and markets diverse lines of professional, industrial, commercial and consumer products. It is headquartered in Washington, DC.
DHR currently carries a Zacks Rank #4 (Sell). In the past year, the stock has gained 6.6% against the industry’s 6.5% decline.
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Let’s discuss the factors, which are likely to continue taking a toll on this company.
Segment Weakness: Weakness in Danaher’s Instrument businesses, led by lower demand across pharma and biotech markets in China, has been weighing on the Life Sciences segment. The company has been witnessing a sales decline in mass spectrometry, flow cytometry & lab automation solutions and microscopy businesses due to soft demand for equipment in major end markets. Softness in the genomics consumables business, owing to tepid sales in the gene reading and proteins product lines, remains concerning for the segment.
Also, weakness in the Biotechnology segment raises concerns for the company. Decreased demand in the discovery and medical business has been weighing on the performance of the Biotechnology segment.
Increasing Expenses: Danaher has been dealing with the adverse impacts of high costs and expenses. The company’s selling, general and administrative (SG&A) expenses increased 19.2% year over year in the third quarter of 2024 due to the impact of the Abcam acquisition, including the associated amortization expense. The metric, as a percentage of net sales, increased 480 basis points to 35.5% in the quarter. Also, it's worth noting that in 2023, its SG&A expenses, as a percentage of net sales, increased 400 basis points to 30.7%.
Forex Woes: Danaher has operations in multiple nations. Such business diversifications expose it to risks stemming from unfavorable movements in foreign currencies, geopolitical issues and other headwinds. Forex woes had an adverse impact of 1% on the company’s revenue growth in the first nine months of 2024.
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