NEW YORK – Danaher's diversification of its business conglomerate has led to increased stability and second quarter revenue growth in the face of headwinds, company executives said on Thursday.
The firm's diagnostics business and China execution were particularly strong in the quarter, management said during a conference call to discuss the second quarter earnings.
On the call, Danaher's CEO Rainer Blair attributed the quarterly growth to the firm's diverse mix of "high-quality franchises in attractive end markets with meaningful recurring revenues and durable business models." He further noted that three quarters of the firm's revenues are recurring and "captive," meaning they are specific to Danaher's equipment and instruments.
"Add to that our scale … [and] the strength of our balance sheet, we actually see these challenging macro environments as opportunities," Blair said, commenting on anticipated near-term global economic challenges.
Danaher reported before the opening of the market on Thursday that its second quarter revenues increased approximately 8 percent year over year due to growth in its base business, particularly diagnostics.
For the three months ended July 1, revenues rose to $7.75 billion from $7.22 billion in the second quarter of 2021, beating the average Wall Street analyst estimate for revenues of $7.30 billion.
Diagnostics revenues grew approximately 10 percent, with 13 percent core growth led by nearly 30 percent growth at Cepheid, Blair said. Other diagnostics businesses collectively delivered mid-single digit core revenue growth "despite headwinds from COVID 19-related shutdowns in China," he said.
The firm expects to see a decline in COVID testing revenues. Danaher had also realized approximately $2 billion in COVID-related vaccine and therapeutics revenues in 2021, and anticipates $1 billion in 2022, which is expected to trail off to $500 million by 2023.
That said, Danaher is also seeing high demand for its combination "four-in-one" test from subsidiary Cepheid to detect SARS-CoV-2, influenza A and B, and respiratory syncytial virus. Specifically, the four-in-one test made up half of the 16 million COVID tests shipped in the quarter, with COVID-only tests comprising the remainder. Overall, Danaher realized $750 million in Q2 revenues for respiratory testing, exceeding prior expectations for $400 million.
The firm also saw high-single digit growth of its business in China despite lengthy lockdowns, significantly exceeding the firm's expectations.
During local COVID lockdowns, manufacturing associates in China "literally lived in the plant," Blair said on the call. "We built showers, they had cots, we had food and clothing brought in … in order to facilitate what is nothing short of extraordinary execution," he said.
The team also diligently drove the import process to ensure goods not locally manufactured in China weren't stuck in ports as congestion associated with shutdowns began to unwind, he said. "Our people were at the front of the line making sure that our goods got in first," Blair said.
The company's net income in Q2 was $1.68 billion, or $2.25 per share, compared to $1.79 billion, or $1.40 per share, a year ago. On an adjusted basis, Danaher reported earnings of $2.76 per share, beating the average analyst estimate of $2.35 per share.
Danaher did not report cash and cash equivalents.
The company's guidance for the full year remains unchanged, the firm said. It had previously guided for full-year 2022 base business core revenue growth in the high-single digit percent range on a non-GAAP basis.
Danaher's shares rose approximately 8 percent to $276.97 in morning trading on the New York Stock Exchange.