As my title is meant to suggest, there aren't a lot of flashy or exciting things going on at Danaher (NYSE:DHR). Then again, how much flash can you really expect from a conglomerate that focuses on businesses such as water quality, electronic tests, product IDs, and hand tools?
Danaher has never been a robust top-line grower, and this quarter was no different. Sure, better than 21% growth in reported revenue looks impressive, but carve down to the organic growth, and you see a number more like 6%. And that mid-single-digit core growth was consistent across the business -- the large segments dealing with professional instrumentation and industrial technology posted 6% and 7.5% core growth, respectively, while the much smaller tools business brought up the rear with 3.5% growth.
Though the company once again posted good cash flow growth, the margin-compression issue remains. Operating margins slipped a bit from last year, though the company points out that they would have been up more than a full point if not for acquisitions and stock-option expense. Trouble is, acquisitions are a core part of this business -- there have been five deals to date this year. So I'm not sure whether investors should entirely ignore that impact, though I do realize that Danaher deserves a break when it comes to giving the company time to bring up the performance of acquired businesses to normal standards.
Danaher faces off against top-end companies ranging from Bayer (NYSE:BAY) to Dover (NYSE:DOV) to Agilent (NYSE:A) to Stanley Works (NYSE:SWK) across its units. But that's been true for a while now, and it hasn't stopped Danaher from posting attractive returns on capital and long-term cash flow growth.
The question now, perhaps, is how Danaher will navigate what appears to be a slowing economy. This could be an opportunity for the advantages of diversity to show themselves -- segments such as medical technology aren't so economically sensitive -- but even if the economy does slow, I have little doubt that Danaher will hunker down and push through it. After all, good businesses aren't built by accident, and they don't fail just because economic growth slows.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
