Danaher (DHR)

Diversified science and technology company Danaher (NYSE:DHR) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 4.4% year on year to $6.05 billion. On the other hand, next quarter’s revenue guidance of $6.70 billion was less impressive, coming in 4.7% below analysts’ estimates. Its non-GAAP profit of $1.89 per share was 9.8% above analysts’ consensus estimates.

Company Overview

Born from a real estate investment trust that transformed into a manufacturing powerhouse, Danaher (NYSE:DHR) is a global science and technology company that provides specialized equipment, software, and services for biotechnology, life sciences, and diagnostics.

The life sciences subsector specializing in research tools and consumables enables scientific discoveries across academia, biotechnology, and pharmaceuticals. These firms supply a wide range of essential laboratory products, ensuring a recurring revenue stream through repeat purchases and replenishment. Their business models benefit from strong customer loyalty, a diversified product portfolio, and exposure to both the research and clinical markets. However, challenges include high R&D investment to maintain technological leadership, pricing pressures from budget-conscious institutions, and vulnerability to fluctuations in research funding cycles. Looking ahead, this subsector stands to benefit from tailwinds such as growing demand for tools supporting emerging fields like synthetic biology and personalized medicine. There is also a rise in automation and AI-driven solutions in laboratories that could create new opportunities to sell tools and consumables. Nevertheless, headwinds exist. These companies tend to be at the mercy of supply chain disruptions and sensitivity to macroeconomic conditions that impact funding for research initiatives.

Danaher competes with several major life sciences and medical technology companies including Thermo Fisher Scientific (NYSE:TMO), Abbott Laboratories (NYSE:ABT), Siemens Healthineers (ETR:SHL), Roche (SWX:ROG), and Becton Dickinson (NYSE:BDX). In specific segments, it also faces competition from specialized players like Illumina (NASDAQ:ILMN) in genomics and Bio-Rad Laboratories (NYSE:BIO) in life sciences research.

Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.

With $24.27 billion in revenue over the past 12 months, Danaher sports economies of scale. This is important as it gives the company more leverage in a heavily regulated, competitive environment that is complex and resource-intensive.

A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Regrettably, Danaher’s sales grew at a mediocre 4.7% compounded annual growth rate over the last five years. This was below our standard for the healthcare sector and is a tough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. Danaher’s recent performance shows its demand has slowed as its revenue was flat over the last two years.

Danaher also reports organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Danaher’s organic revenue averaged 1.4% year-on-year declines. Because this number aligns with its two-year revenue growth, we can see the company’s core operations (not acquisitions and divestitures) drove most of its results.

This quarter, Danaher reported modest year-on-year revenue growth of 4.4% but beat Wall Street’s estimates by 0.8%. Company management is currently guiding for a 2.5% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 5.6% over the next 12 months, an improvement versus the last two years. This projection is above the sector average and suggests its newer products and services will fuel better top-line performance.

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Danaher has been an efficient company over the last five years. It was one of the more profitable businesses in the healthcare sector, boasting an average operating margin of 25%.

Analyzing the trend in its profitability, Danaher’s operating margin decreased by 9 percentage points over the last five years. The company’s two-year trajectory also shows it failed to get its profitability back to the peak as its margin fell by 5.8 percentage points. This performance was poor no matter how you look at it - it shows its expenses were rising and it couldn’t pass those costs onto its customers.

In Q3, Danaher generated an operating margin profit margin of 19.1%, up 2.5 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Danaher’s EPS grew at a solid 7% compounded annual growth rate over the last five years, higher than its 4.7% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t improve.

Diving into the nuances of Danaher’s earnings can give us a better understanding of its performance. A five-year view shows that Danaher has repurchased its stock, shrinking its share count by 1.5%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

In Q3, Danaher reported adjusted EPS of $1.89, up from $1.71 in the same quarter last year. This print beat analysts’ estimates by 9.8%. Over the next 12 months, Wall Street expects Danaher’s full-year EPS of $7.71 to grow 7.7%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Danaher has shown terrific cash profitability, enabling it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the healthcare sector, averaging 25% over the last five years.

Taking a step back, we can see that Danaher’s margin dropped by 8 percentage points during that time. Continued declines could signal it is in the middle of an investment cycle.

Danaher’s free cash flow clocked in at $1.37 billion in Q3, equivalent to a 22.6% margin. This result was good as its margin was 1.7 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, leading to temporary swings. Long-term trends carry greater meaning.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Danaher’s management team makes decent investment decisions and generates value for shareholders. Its five-year average ROIC was 8.3%, slightly better than typical healthcare business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Danaher’s ROIC averaged 3.2 percentage point decreases each year. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Danaher reported $1.53 billion of cash and $16.86 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $7.68 billion of EBITDA over the last 12 months, we view Danaher’s 2.0× net-debt-to-EBITDA ratio as safe. We also see its $112 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We enjoyed seeing Danaher beat analysts’ organic revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its revenue guidance for next quarter missed and its full-year EPS guidance was just in line with Wall Street’s estimates. Overall, this print was mixed. The stock remained flat at $207 immediately following the results.

Updated: December 4, 2025 at 10:42 PM EST

Before making an investment decision, investors should account for Danaher’s business fundamentals and valuation in addition to what happened in the latest quarter.

Danaher isn’t a terrible business, but it isn’t one of our picks. First off, its revenue growth was uninspiring over the last five years, and analysts don’t see anything changing over the next 12 months. And while its impressive operating margins show it has a highly efficient business model, the downside is its organic revenue declined. On top of that, its diminishing returns show management's prior bets haven't worked out.

Danaher’s P/E ratio based on the next 12 months is 28.2x. Investors with a higher risk tolerance might like the company, but we don’t really see a big opportunity at the moment. We're fairly confident there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $255.67 on the company (compared to the current share price of $227.64).