Danaher crushed second-quarter expectations Thursday, bolstered by strong Covid testing sales. DHR stock surged higher above its 50-day line.
The company reported nearly $2.6 billion in sales from its diagnostics business, up about 10% year over year. However, Danaher cautioned those sales will likely retreat somewhat when the pandemic becomes endemic. The same is true for the products Danaher makes to help develop vaccines and treatments for Covid, the company said in a news release.
But Edward Jones analyst John Boylan expects Danaher to have a long tailwind.
"Covid-19 testing could become a regular or seasonal occurrence, much like flu tests are today," he said in an email to Investor's Business Daily. "Therefore, we expect it to retain notably higher testing sales than before the pandemic. Additional research on new vaccine technology gained during the pandemic should help scientific equipment sales."
On today's stock market, DHR stock jumped 9.1% to 279.23. Shares regained footing above their 50-day moving average on Monday and are now on a three-day run, according to MarketSmith.com.
DHR Stock: Covid Testing Future Uncertain
Overall, Danaher earned an adjusted $2.76 per share on $7.75 billion in sales. On a year-over-year basis, earnings climbed 12% while sales advanced about 7.5%. Both measures easily beat the average estimate of analysts polled by FactSet for earnings of $2.35 a share and $7.3 billion in sales.
The base business, which excludes the impact of Covid testing sales, grew 8%, Danaher said.
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Danaher's biggest business is its life sciences division, which provides the tools to help researchers perform their work. Sales in that business grew more than 6% to $3.97 billion. Its environmental and applied solutions business, a provider of everything from consumer packaging to systems for drinking water purification, generated $1.22 billion in sales, increasing 6.5%.
"Solid sales and earnings from these groups should continue thanks to ongoing research into new drug therapies, such as biologic drugs, and to increased investments many communities and companies are making to improve water quality," said Boylan, the Edward Jones analyst.
He doesn't believe the positive outlook is reflected in DHR stock, however. On a year-to-date basis, shares have fallen more than 22% as of Wednesday's close.
Bullish Guidance For 2022
For the year, Danaher expects its base business to achieve high single-digit sales growth. The Covid test segment will grow by a low single digit, the company predicted.
In comparison, DHR stock analysts forecast adjusted profit of $10.29 per share on $30.62 billion in sales. Earnings could rise more than 2% as sales inch 4% ahead.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
