Danaher took a major dip in its full-year earnings report, with revenues dropping more than 10% in 2023 despite better-than-expected results from the fourth quarter, following what it described as a “transformational year” for the company and an ongoing period of change that it expects will extend through at least the first half of 2024.
President and CEO Rainer Blair said on the company’s earnings call Tuesday that, “Now, over the long term, we believe Danaher will be a faster-growing business with higher margins and stronger free cash flow generation.”
Last year saw Danaher spin out its environmental, water quality and applied solutions businesses in late September—forming the independent company Veralto—to help renew its focus on life sciences and diagnostics, while last December brought the addition of British antibody and proteomics player Abcam through the closure of a $5.7 billion acquisition deal.
At the same time, like all diagnostics developers, the company felt COVID-19 pandemic tailwinds turn into headwinds, according to Blair, as the public’s demand for tests continued to wane. Meanwhile, challenges in high-growth international markets such as China also contributed to Danaher’s declines in its life science and biotechnology divisions.
Full-year sales dropped 10.5%, from 2022’s $26.64 billion to 2023’s $23.89 billion, the company said. That included a slight decrease among Danaher’s core businesses coupled with a COVID-related headwind of about 9.5%, Blair said. Net earnings reached $4.2 billion.
For the fourth quarter alone, sales were down 10% to $6.41 billion versus $7.13 billion during the same period the year before. Bioprocessing sales, which includes Danaher’s Cytiva unit, were down 21% during that time, falling to $1.76 billion from the segment’s $2.22 billion total a year prior.
“The environment in North America and Europe is stable, with customers still working through inventory built up during the pandemic,” Blair said. “Demand and underlying activity levels in China remain weak as customers are continuing to conserve capital and prioritize programs. For the full year of 2024, we expect core revenue in our bioprocessing business to be down low single digits.”
Still, Blair said core quarterly revenues in each of the company’s segments were at least better than expected. One clear winner was a respiratory testing gain from Cepheid: On the back of a four-in-one screener for COVID, respiratory syncytial virus and two types of flu, the diagnostics subsidiary's sales reached about $650 million to thoroughly beat previous internal estimates of $350 million.
“Based on what we saw the last two years and on our discussions with customers and public health experts, we believe annual respiratory revenue in a typical season will be approximately $1.5 billion,” Blair said. “This increase from our initial assumption of $1.2 billion per year is driven by modestly higher volumes and a greater mix of our four-in-one tests.”
“Additionally, Cepheid's respiratory franchise is now six times larger than it was prior to the pandemic, and we expect this to be sustainable,” he added.
Among the several life-science-focused companies in Danaher’s portfolio—including Sciex, Leica, Aldevron and now Abcam, among others—revenue slid a total of 1% amid drops in core sales and gains from acquisitions. The fourth quarter of 2023 logged $1.93 billion in sales compared to $1.95 billion the year prior.
In terms of 2024 guidance, the company said it expects core revenue to be down low single digits year over year, with the first quarter declining by high single digits. And, going forward, Danaher said it will no longer separate out and “report base business core revenue, as the pandemic has transitioned to an endemic state.”