Shares of Danaher popped more than 6% on Tuesday after the life sciences company delivered a strong quarter and reaffirmed its guidance — signaling the longtime Club stock is back on track. Revenue for the period ended June 28 declined 3.5% organically year over year to $5.74 billion, outpacing analyst estimates of $5.59 billion, according to LSEG. Total sales on a reported basis dropped nearly 2.9% year over year. Adjusted earnings per share (EPS) decreased less than 1% annually to $1.72, ahead of the consensus estimate of $1.57 per share. Danaher Why we own it : Danaher is a best-in-class life sciences and diagnostics company, with a management team who have proven time and again their ability to find new ways to grow. We expect to see a turn in bioprocessing-related orders this year as biotech funding comes back online and larger customers wind down efforts to flush out excess Covid-era inventory. Competitors : Sartorius and Thermo Fisher Scientific Weight in portfolio : 4.6% Most recent buy : July 2, 2024 Initiated : Jan. 3, 2022 Bottom line This quarter was exactly what we needed to see from Danaher. In addition to strong performance at the companywide level — with profit margins and cash flow generation complementing the strength in sales and earnings — bioprocessing demand is improving as end market inventory and funding continue to normalize. That improvement in the bioprocessing end market is super important because it has been a huge overhang for Danaher shares, and the life sciences space in general. Bioprocessing is a broad term that refers to the research, development, manufacturing, and commercialization of products prepared from living cells or their components, including food, fuels, biopharmaceuticals, and so on. We were concerned about the bioprocessing market after rival Sartorius cut its guidance last week. So we were thrilled to see that while there is still some weakness, the trend is improving. On the post-earnings call with investors, management said large U.S. and European customers have worked through the majority of their excess inventories and are returning to normal ordering patterns. The book-to-bill ratio in biotechnology remains just shy of 1, compared to 0.95 last quarter. As a reminder, book-to-bill measures the amount of business booked, versus the amount billed; a ratio greater than 1 is favorable because it means that demand is exceeding supply and resulting in backlog growth. Still room for improvement then, but Danaher is heading in the right direction. The Chinese market remains weak. But the company said it is seeing growing demand from customers and expects it to grow next year thanks to government stimulus. Management doesn’t expect to see a real financial improvement materialize until 2025. The management team has effectively navigated the bioprocessing slowdown better than others and kept expectations managed — a big reason we’ve stuck by the stock during a difficult few quarters. The strong…
Read More: We’re raising our price target on Danaher as it loses major overhang