Danaher (DHR) Q3 2026 earnings review
Danaher grows faster, but flu tests shrink its sales plan
Danaher's businesses grew faster for a third quarter, but flu-test sales keep pulling the total down. Sales from businesses it owned a year ago, excluding respiratory tests, rose 5.5%, and profit per share excluding one-offs climbed 12%. New chief executive Julie Sawyer Montgomery raised the profit plan but lowered the sales plan, because she now expects about $100 million less from flu tests this year.
| Sales from businesses owned a year ago, excluding flu tests | +5.5% +4.5% last quarter |
|---|---|
| Profit per share, excluding one-offs | $2.11 +11.6% from a year ago |
| Full-year profit outlook | Raised middle of the range $8.595, about 10% above last year |
| Full-year sales growth outlook, all businesses | Cut to about 2.5% 3% to 4% three months ago |
⚖️ Verdict: 🟢 Bullish
The story got better because growth outside flu tests sped up again and every segment took part. Profit margin rose despite Masimo's lower profitability, so the raised profit plan rests on the business rather than on the deal. The bad news: Danaher promised to leave this year growing at a mid-single-digit rate, and that promise now applies only to sales excluding flu tests, while the fourth-quarter plan has the total growing about 3%.
The question now is whether the slower fourth quarter the plan calls for is caution or a real cooling. If sales excluding flu tests grow near 5% again, the plan was cautious and next year starts from a higher base; if they grow nearer 4%, this quarter was the peak. The fourth-quarter results in late January will settle it.
🐂 Bull Case
Growth Outside Flu Tests Sped Up Again
Danaher reports growth two ways. Core sales count only the businesses it owned a year ago, at constant currency. A second measure also leaves out respiratory tests, whose demand follows the flu season. Chief executive Julie Sawyer Montgomery leaned on the second measure, saying she is "encouraged by the improving trends we saw across our end markets".
That underlying rate has risen every quarter this year, and this time every segment took part. Bioprocessing, the consumables and equipment used to make biologic drugs, came in "slightly better than our expectations", the group wrote, with consumables leading and "improved equipment sales" behind them.
- Growth excluding flu tests: 3.0% in Q1, 4.5% in Q2, 5.5% in Q3
- Biotechnology: core sales up 5.0%, bioprocessing near the top of mid-single digits
- Life Sciences: core sales up 4.5%, led by filters and lab instruments
- Diagnostics excluding flu tests: up 7.0%, led by clinical lab testing
This matters because the standing worry was that Danaher is a slow grower that keeps changing how it measures itself. Three quarters of acceleration on one measure, with each segment above its own plan, is harder to dismiss than one. But the fourth-quarter plan calls for 4% to 5%, so management itself expects the pace to ease.
What to watch: fourth-quarter growth excluding flu tests, due in late January, together with any bioprocessing order figure, which these materials did not give. A reading at or above 5% would mean the plan was cautious and the acceleration is intact.
Margin Rose Despite Masimo's Lower Profitability
Operating margin excluding one-offs reached 29.0%, up from 27.9% a year ago. That was well above the roughly 26.5% Danaher had planned for the quarter. The gain came from the cost of making products: gross margin excluding one-offs rose 2.4 percentage points of revenue, while selling and administrative costs took 0.9 points more.
Two things held the figure down. Masimo, the patient-monitoring business bought in June, earns less on each dollar of sales than the rest of Diagnostics, and a one-time inventory charge from the deal cost $84 million. Biotechnology went the other way, lifting its margin excluding one-offs to 41.8%, helped by "the impact of IEEPA tariff refunds", the group said.
Those refunds matter, because Danaher got them back from the US government for duties it paid last year and books them as a cut to costs. It has not said how much landed in the quarter, so part of the margin gain may not repeat. Still, the fourth-quarter plan of about 29.5% says management expects the level to hold.
What to watch: the fourth-quarter margin excluding one-offs against the 29.5% plan, and any figure for tariff refunds in the quarter. A margin at or above plan with refunds disclosed as small would mean the gain sits in the cost base rather than in a one-time refund.
High-Growth Markets Grew 10%, Developed Markets Stood Still
Danaher splits its sales into developed markets and high-growth markets, its term for Asia outside Japan, the Middle East, Africa, Latin America and Eastern Europe. The second group now makes up about 31% of sales, and this quarter it did almost all of the growing.
Reported sales in high-growth markets rose 15% and underlying sales rose 10%, with gains in all three segments and every major region. China led with high-single-digit growth, where biotechnology and life sciences customers were "supported by healthy funding and investment levels", the group said. In developed markets underlying sales were flat. Western Europe grew mid-single digits, but North America fell by a low single digit, mostly because it sold fewer flu tests.
This matters because China was the standing drag: price cuts under its volume-based procurement programme, a government bulk-buying scheme, pulled Diagnostics prices down for two years. Diagnostics prices still fell 1.0% this quarter, but China's volume now outgrows that, so the region adds to growth instead of subtracting from it.
What to watch: the geographic table in the next quarterly filing. Underlying growth in high-growth markets staying near 10% would mean the China recovery is holding through the fourth quarter rather than fading after one strong period.
🐻 Bear Case
The Promised Exit Rate Now Excludes Flu Tests
Three months ago Danaher said it would leave 2026 growing at a mid-single-digit rate, and its fourth-quarter plan for total core sales said the same. The new fourth-quarter plan says about 3%. The mid-single-digit promise survives only on the measure that leaves out respiratory tests, so the goal did not move; the yardstick did.
- Full-year core growth plan: 3% to 6% in April, 3% to 4% in July, about 2.5% now
- Full-year respiratory revenue plan: about $1.8 billion in January, $1.6 to $1.7 billion in April, $1.6 billion in July, $1.5 billion now
- Fourth-quarter respiratory revenue: about $400 million, against the $500 million planned in July and sold a year ago
"No change to the full year outside of respiratory", the company wrote, and the arithmetic supports that: growth excluding flu tests is still planned at a mid-single-digit rate. But respiratory tests brought in about $350 million this quarter, ahead of the roughly $325 million planned. Management cut the fourth quarter anyway, repeating the warning that customers' purchases earlier in the year "could adversely impact demand for such tests over the remainder of 2026".
This matters because a line Danaher says it cannot control has now been lowered four times in a year, and it takes the headline growth rate with it. Each cut arrives with the same reassurance about everything else. A reader who follows the headline measure sees a growth plan that has fallen for three straight quarters.
What to watch: fourth-quarter respiratory revenue against the $400 million plan, due in late January. A figure at or above it would mean the series of cuts has ended and the two growth measures can start to converge next year.
Masimo Cuts Diagnostics' Margin and Stops Buybacks
Masimo, the maker of pulse oximeters and patient monitors that Danaher bought for $9.8 billion in June, now sits inside Diagnostics. Its first full quarter cut the segment's reported operating margin to 21.3% from 27.0%. Two things explain almost all of the drop. The acquired business took off 3.65 percentage points on its own, and a one-time inventory charge took off another 2.95.
The deal also changed how Danaher uses its cash. It bought back no shares in the quarter, after spending $2.0 billion on buybacks in the same quarter last year. Total debt stands at $26.5 billion, and the group paid cash for StatLab, a maker of pathology consumables, three days after the quarter closed.
- Net interest cost: $104 million, up from $64 million a year ago
- Commercial paper: €4.1 billion due within a year but booked as long-term debt because Danaher intends to refinance it
- Apple litigation: a court entered a $634 million judgment in Masimo's favour and added $184 million of interest, with both sides appealing
This matters because the standing concern was that Masimo removed the balance-sheet room management spent two years describing. The numbers now bear that out: cash went to deals, not to shares, and the share count fell only 1% from a year ago. The Apple award cuts the other way, because it could become cash, but Danaher has not yet published what Masimo itself sells or earns.
What to watch: Masimo's own sales and margin in the fourth quarter, and whether buybacks resume now that StatLab is paid for. A disclosed Masimo margin close to the rest of Diagnostics would mean the dilution is the one-time charge, not the business.
Risks This Quarter Didn't Answer
Four standing concerns got partial or no new numbers in the release and the quarterly filing, and no call transcript was among the materials, so management's spoken answers are not readable here.
- Bioprocessing orders: Danaher reported better equipment sales but gave no order growth or book-to-bill figure; the mid-single-digit fourth-quarter plan for Biotechnology is the only forward reading.
- China pricing: Diagnostics prices fell 1.0% in the quarter on volume-based procurement, less than the 1.5% decline over nine months; a return to flat prices would settle it.
- Headcount: about 60,000 staff, unchanged from last quarter even after Masimo's workforce joined, with no restructuring charge or explanation disclosed.
- Masimo legal matters: the Justice Department inquiry into recalled Rad-G and Rad-97 monitors now carries a possible loss of $5 million to $40 million; founder lawsuits and the Willow arbitration, with a hearing in November, remain open.
👓 Other Themes
StatLab Joins Masimo as the Year's Second Deal
Danaher paid about $1.4 billion in cash for StatLab on September 28, three days after the quarter closed. The group calls StatLab "a leading provider of pre-analytical consumables and equipment", the supplies pathology labs use before they analyse a sample, with about $250 million of sales in 2025. It joins Diagnostics in the fourth quarter, and its growth will count in core sales only after a full year of ownership.
New Chief Executive; Founders Waive Special Share Awards
Julie Sawyer Montgomery has taken over as president and chief executive, a role Rainer Blair held through the second quarter, and she describes herself as still "during my transition into the CEO role". In August the board granted special long-term share awards to founders Steven and Mitchell Rales, other executives and key leaders. On October 9 the founders "waived their rights to such RSUs for no consideration", so Danaher books a $185 million non-cash charge in the fourth quarter, outside its profit figures excluding one-offs.
Tariff Refunds Now Cut Both Sales and Costs
The US Supreme Court ruled in February that tariffs imposed under emergency powers were unlawful, and Danaher is claiming refunds. Refunds it passes on to customers cut reported sales by 1.0% this quarter, 4.0% in Biotechnology, and from now on the group excludes them from core sales. Refunds it keeps reduce cost of sales; the net gain to profit over nine months was under $100 million. The Middle East conflict added logistics costs and delivery delays.
💲 Other KPIs
Cash left after capital spending rose 19% from a year ago, the fastest growth in five quarters, as operating cash flow climbed and capital spending fell to $255 million. Cash conversion, free cash flow divided by net profit, slipped to 1.35 times from 1.51. That is because a $263 million tax benefit lifted reported profit without adding cash.
Contracted work not yet delivered edged down from $7.5 billion at the end of June, with about 41% due to turn into revenue over the next twelve months. Danaher began disclosing the figure only last quarter, so two points do not yet make a trend. Customer prepayments, booked as contract liabilities, stood at $1.7 billion against $1.6 billion at year-end.
Sales of consumables, services and leases rose 7.6% from a year ago, helped by Masimo's sensors, and made up 82% of total sales. Equipment and other one-time sales grew faster, up 11.5%, which fits the better equipment demand Danaher reported in bioprocessing and lab instruments.
🔮 Guidance
Unchanged in substance. The plan puts underlying growth at 4% to 5% in the fourth quarter, inside the mid-single-digit range set in July but below the 5.5% just delivered. By our math the full year then lands near 4.5%, consistent with the unchanged mid-single-digit plan for the year.
Cut. The plan for all core sales fell to about 3% from a mid-single-digit rate. Danaher expects respiratory tests to take about 1.5 percentage points off growth. By our math the $100 million drop in flu-test sales equals about 1.5 points of last year's fourth-quarter sales, so the two parts of the plan agree.
Cut. Danaher now expects about $400 million of flu-test sales in the fourth quarter, a fifth less than a year ago and $100 million below July's plan. The cut follows a third quarter that beat its own plan, and management repeated the warning that customers bought tests early in the year. By our math the full-year figure is fully spoken for by the quarters already reported and this plan.
New. The plan calls for a margin excluding one-offs of about 29.5%, above this quarter's 29.0%. The same quarter last year was 28.3%. Danaher has beaten its own quarterly margin plan in each of the last four quarters, by 1.5 points on average; if the pattern holds, the quarter lands near 31%.
Raised. The middle of the range moved up seven cents to $8.595, about 10% above last year. That is the double-digit growth management had promised. By our math that leaves roughly $2.49 for the fourth quarter, up 11% from a year ago. It is the third raise this year, and the raise follows this quarter's beat rather than any change to the fourth-quarter plan.
Cut. The plan is now about 2.5% growth from businesses owned a year ago. It is the third reduction in three quarters; the range started the year at 3% to 6%. By our math the nine-month rate and the fourth-quarter plan together give about 2.3%, so the printed figure is rounded up. Management attributes the whole cut to flu tests.
Unchanged. Growth outside flu tests stays planned at a mid-single-digit rate. Nine months have delivered 4.5%, and the fourth-quarter plan sits at the same level, so by our math the year ends near 4.5%, at the low end of the phrase. The company wrote there is "No change to the full year outside of respiratory".
Cut. Danaher now expects about $1.5 billion of flu-test sales this year, against $1.9 billion last year. It is the fourth reduction since January, and each one has arrived described as a change to respiratory only. The cut is the whole difference between the unchanged plan outside flu tests and the lower plan for the total.
Raised. The fourth-quarter plan for Life Sciences, the segment selling lab instruments, filters and research consumables, moved up one point after the segment beat its own plan for the second quarter running. The full-year plan is unchanged at 3% to 4%, which by our math is already within reach.
Cut. Diagnostics, the segment that sells lab analysers, molecular tests and now patient monitors, is planned flat for the year instead of up slightly. The move is the respiratory cut: excluding flu tests the segment grew faster than any other this quarter, and the fourth-quarter plan keeps that measure in mid-single digits.
Unchanged in practice. Net interest cost of about $305 million for the year is slightly below July's figure and more than double the pre-Masimo plan of $140 million. The cost rises next quarter. The plan assumes $120 million for the fourth quarter, above this quarter's $104 million, because cash paid for StatLab and the euro notes repaid in September will earn less interest income.
Unchanged in substance. Corporate costs of about $355 million exclude roughly $200 million of expense for the special share awards granted in August, including the charge for the founders' cancelled units. That expense sits outside the profit figures excluding one-offs, so the raised profit plan does not carry it.
❓ Key Questions
What were bioprocessing orders and book-to-bill this quarter?
The mid-teens order growth reported in July was the only forward evidence for the underlying acceleration. The release and filing give revenue only, so the order level and whether equipment is part of it remain unknown.
Why cut fourth-quarter flu-test sales after a third-quarter beat?
Respiratory tests sold $350 million against a $325 million plan, yet the fourth quarter was cut by $100 million. The company should say what it now assumes about season severity and how much customers stocked earlier in the year.
What did Masimo sell and earn on its own?
By our math acquisitions added about $390 million of sales, but Masimo's own growth and margin are not published. Without them the 3.65-point drag on Diagnostics' margin cannot be split between the business and purchase accounting.
How much did tariff refunds add to the third-quarter margin?
Refunds reduced cost of sales in all three segments and helped lift Biotechnology's margin by 4.6 points. The nine-month net profit effect was under $100 million; the quarterly figure decides how much of the margin gain repeats.
Why is headcount still 60,000 after Masimo's staff joined?
Staff numbers were 63,000 at year-end and 60,000 for two quarters despite the acquisition. No restructuring charge or programme is disclosed, so either the definition changed or a reduction has gone unexplained.