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A Look at Danaher’s 4Q16 Margin Estimates

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Danaher’s EBITDA estimates

In 4Q15, Danaher’s (DHR) adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) was ~$1.4 billion, while its EBITDA margin was 23.3%. 

In 4Q16, analysts expect DHR to report ~$1.1 billion in EBITDA with an EBITDA margin of 24.1%. A lower EBITDA figure implies lower income from the company’s ongoing operations.

The expected fall in EBITDA is primarily due to DHR’s spin-off of industrial-focused (XLI) Fortive and Industrial Technologies (SIJ) into Fortive Corporation (FTV).

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DHR’s Cepheid (CPHD) acquisition may not add value to its EBITDA in 4Q16. More recently, Cepheid has been operating income–negative due to its research and development costs exceeding 21% of its sales. At ~33% of its sales, its selling, general, and administrative expenses are higher than Danaher’s comparative figure of 29%.

Danaher’s 4Q16 and 2016 guidance

On its 3Q16 earnings call, Danaher said that it expected its 4Q16 adjusted EPS (earnings per share) from continuing operations to be in the $1.01–$1.05 range. The company expects its core revenue growth in the quarter to be similar to the levels it achieved in 3Q16.

For 2016, Danaher has raised its adjusted EPS guidance marginally to the $3.57–$3.61 range, reflecting a year-over-year growth expectation of ~20%. In its last earnings call in July 2016, the company guided for 2016 adjusted EPS in the $3.53–$3.60 range.

In the next and final part of this series, we’ll learn about DHR’s financial position and compare its leverage with those of its peers such as 3M Company (MMM) and Roche Holding (RHHBY).

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