Danaher Q3 Revenues Grow 5 Percent on 'Better-Than-Expected' Cepheid Respiratory Testing Volumes

Original from: 360dx

Danaher reported a 5 percent year-over-year increase in third quarter revenues on Tuesday that was partially due to higher-than-anticipated revenues from Cepheid's respiratory testing business.

For the three months ended Sept. 26, revenues reached $6.05 billion, up from $5.80 billion a year ago and beating the consensus Wall Street estimate of $6.0 billion.

Life sciences revenues rose 1 percent to $1.79 billion from $1.78 billion in Q3 2024, while core revenues fell 1 percent for the segment, the Washington, D.C.-based conglomerate said. On a conference call to discuss the firm's financial results, President and CEO Rainer Blair said instrument revenues were up slightly in the quarter and clinical and applied markets held up well globally. However, demand from academic and government customers remains soft due to ongoing uncertainty around research funding but was stable sequentially. So far, the firm has seen "modest recovery" in pharmaceutical spending and "moderate improvements" in the funding environment in China, he said, which had previously been a drag on the life sciences business.

Life sciences consumables core revenues declined, primarily due to lower demand for plasmids and mRNA from two larger customers, as well as continued funding pressure across early-stage biotech and academic research. Those funding-related declines were partially offset by growth in next-generation sequencing products at Danaher subsidiary IDT and recombinant proteins at Abcam.

Blair noted that the clinical and applied markets have remained fairly solid and that there has been a modest recovery in pharmaceutical research spending. However, the difficulties in the academic and government markets are "anchoring and holding back some of the growth" in the business, he said.

In diagnostics, revenues rose 4 percent to $2.46 billion from $2.36 billion a year ago. Core revenues for diagnostics also rose 4 percent. Clinical diagnostics core revenues grew in the low-single-digit percent range with high-single-digit growth outside of China. Subsidiary Leica Biosystems saw growth of more than 10 percent with strength across core histology, advanced staining, and digital pathology, while Beckman Coulter saw revenue growth in the mid-single-digit percent range outside of China that was driven by continued uptake of its DxI 9000 immunoassay instrument and "strong momentum in commercial execution," Blair said.

In the molecular diagnostics business, Cepheid saw core revenue growth in the mid-single-digit percent range, with high-single-digit growth across the non-respiratory testing business, including 20 percent growth in sexual disease testing. Respiratory testing revenue "exceeded expectations," Blair said, which was likely due to customers purchasing tests earlier than usual to prepare for the upcoming respiratory disease season. 

Cepheid also continued to expand its installed instrument base as a result of healthcare system and integrated delivery network customers adding instruments at sites further out in their networks. That "ongoing installed base expansion combined with a leading test menu and workflow advantages provides a long runway ahead for durable long-term growth at Cepheid," Blair said.

Revenues for the biotechnology business rose 9 percent to $1.80 billion from $1.65 billion in Q3 2024, while core revenues in that segment rose 7 percent year over year. Core revenues in the discovery and medical markets grew in the low-single-digit percent range, Blair said, but that growth was partially offset by declines in protein research instrumentation due to difficulties in the academic market caused by funding constraints.

Bioprocessing saw core revenue growth in the high-single-digit percent range with double-digit growth in consumables offset by declines in equipment sales, which grew sequentially but declined year over year as expected. While customer pipelines for planned projects remain healthy, those pipelines haven't translated to equipment order growth "as customers are awaiting additional clarity on the policy environment before finalizing their investment decisions," Blair said. Danaher expects cautious equipment spending to continue throughout the rest of the year, but Blair noted that the long-term outlook for the biologics market is very healthy. Danaher has "significant opportunity ahead in this market," he added.

Geographically, core revenues in developed markets were up in the mid-single digit percent range, Blair said, with North America revenues up in the mid-single-digit percent range and Western Europe revenues remaining flat year over year. In high-growth markets, core revenues were up in the low-single-digit percent range, with "solid performance" in markets outside of China. China itself saw a decline in the mid-single-digit percent range, as growth in the biotechnology and life sciences businesses in China was more than offset by declines in the diagnostics business due to volume-based procurement and reimbursement policy changes that have been implemented in the past year, Blair said.

The firm posted net earnings of $908 million, or $1.27 per share, in Q3 2025 compared to a profit of $818 million, or $1.12 per share, in Q3 2024. Adjusted EPS was $1.89 and beat analysts' average estimate of $1.72.

The company had $1.53 billion in cash and cash equivalents at the end of Q3.

For the full year, Danaher maintained its previous guidance and expects core revenues will grow in the low-single-digit percent range on a non-GAAP basis. Adjusted EPS is expected to range from $7.70 to $7.80. In Q4, the company expects core revenues to grow in the low-single-digit percent range, Blair said, and market conditions are expected to be "largely consistent" with Q3.

The firm also provided initial guidance for full-year 2026. Danaher expects core revenues to grow between 3 percent and 6 percent and is assuming a "modest recovery" across all end markets. The company is also assuming bioprocessing growth trends will remain consistent with 2025, with continued strength in consumables and high-single-digit percent core growth in bioprocessing. For life sciences, Danaher expects a modest improvement in end markets but is prepared for growth to remain below historical levels. In Q3, the business performed "as expected" with positive activity levels, but that activity did not convert to equipment orders, Blair said. The company expects flat growth in life sciences for 2026.

On the diagnostics side, the firm expects higher growth as it moves past headwinds from policy changes in China, Blair said. Respiratory revenue is expected to be consistent in 2026 at $1.7 billion. CFO Matt McGrew said the firm is "getting to the other side of the [VBP and reimbursement] wave" and expects headwinds between $75 million and $100 million in 2026 due to the program and other reimbursement changes in China. He called that headwind "fairly modest and manageable."

Outside of respiratory testing, Cepheid expects growth in the high single-digit to low double-digit percent range in 2026, McGrew said.

Blair noted that the market and policy environment is "still fairly dynamic" and that Danaher could see "a range of outcomes" in 2026, but that it's prudent to assume a modest recovery in the firm's end markets.

Regarding M&A activity, Blair said Danaher maintains a "strong bias" toward M&A and is very active on that front but noted that the end market and company must be attractive, and the valuation model has to work for any acquisition. 

In afternoon trading Tuesday on the New York Stock Exchange, Danaher shares rose 7 percent to $223.78.

Source: Danaher Q3 Revenues Grow 5 Percent on 'Better-Than-Expected' Cepheid Respiratory Testing Volumes