(In "UPDATE: Danaher 1Q Profit Rises 43%; Acquisitions Supply Growth" at 10:38 a.m. EDT, operating profit from Danaher's Life Sciences and Diagnostics unit was misstated in the ninth paragraph. The correct version follows:)
--Danaher tops 1Q profit, revenue expectations
--Company narrows 2012 guidance.
--The addition of Beckman Coulter drives big increases in revenue, profit
(Updates with comments and quotes from conference call. Additional details throughout about markets and business conditions.)
By Bob Tita
Danaher Corp.'s (DHR) first-quarter earnings rose 43%, driven mostly by income from the acquisition of medical-test manufacturer Beckman Coulter.
The diversified manufacturer of testing, diagnostic and medical equipment topped analysts' expectations for the quarter, but offered second-quarter guidance that was slightly below expectations because of per-share profit dilution caused by the pending purchase of X-Rite Inc. (XRIT).
The company narrowed its 2012 per-share earnings estimate to $3.25 to $3.35 from its previous range of $3.20 to $3.35. The new forecast includes 3 cents of anticipated dilution related to X-Rite.
Danaher said geographic demand patterns for its products during the first quarter were largely as anticipated with growth in the U.S. offsetting flat demand in China and lower orders in Europe, where economic growth has stalled amid the continent's sovereign debt crisis.
"We are encouraged by a number of the booking trends we saw in the U.S. and the emerging markets," said Chief Executive Larry Culp during a conference call Thursday. "As we go through the year, China should get better. Obviously, we saw Europe soften a bit."
Danaher's product lines include calibration devices, orthodontic devices, water treatment products, medical tests and laboratory equipment. The Washington D.C. company has been shifting its focus to high-margin, high-growth medical and science businesses and away from cyclical industrial product lines, such as hand tools and defense equipment.
Danaher has used acquisitions to realign its business portfolio. The company's acquisitions accounted for much of the 31% increase in revenue recorded for the first quarter. Revenue from Danaher's core of existing businesses grew by 1.5% in the quarter, while recently acquired businesses reported a 30.5% increase in revenue from a year ago. The company's overall operating margin in the first quarter slipped to 17% from 17.8% a year earlier.
Earlier this month, Danaher reached a deal to acquire color-measurement technology company X-Rite for $478 million. The purchase of the Grand Rapids, Mich., company is expected to complement Danaher's digital design capabilities and expand offerings in product identification industry. Danaher expects the X-Rite purchase to close during the second quarter.
Danaher's $5.78 billion acquisition of Beckman Coulter last year continued to drive Danaher's sales and profit expansion. First-quarter sales from the company's life sciences and diagnostics unit, which includes Beckman, increased 147% from a year ago to $1.54 billion. Operating profit from the unit soared to $205.9 million from $90.4 million a year ago, even as the unit's operating margin slipped to 13.3% from 14.4% a year ago.
Danaher has been confronted by host of challenges to transform Beckman into an efficient, high-margin operation after Beckman was hit with multiple product recalls and cited for inadequate quality controls by the U.S. Food and Drug Administration.
"While there is a lot of work ahead, we are happy with what the team has accomplished in the last nine months," Culp said. "We're seeing excellent progress on the cost side. The improvements are starting to turn up in the numbers."
Overall for the first quarter, Danaher reported a profit of $612.9 million, or 86 cents a share, up from $429.4 million, or 63 cents a share, a year earlier. Earnings from continuing operations were up at 73 cents per share from 61 cents. Revenue increased 31% to $4.32 billion.
Analysts had expected the company to earn 71 cents per share on revenue $4.32 billion.
For the second quarter, Danaher forecast per-share earnings of 76 cents to 81 cents, including anticipated dilution of a penny from X-Rite. Analysts polled by Thomson Reuters expected per-share earnings of 82 cents.
Danaher's shares were recently down 2.1% at $53.53.
--By Bob Tita, Dow Jones Newswires; 312-750-4129; [email protected]