I've liked the still-somewhat-unknown conglomerate Danaher (NYSE:DHR) for some time. It's an intriguing mix of cyclical businesses like motion, aerospace, and electronic test equipment, and generally less-cyclical businesses like medical technology and environmental products. Better still, it has a solid record of growth in free cash flow and return on invested capital -- the two metrics I probably follow more than any others.
Not to slight the company in any way, but the fourth quarter was just more of the same. Revenue rose a bit more than 14% as reported, and core organic revenue increased more than 5%. Margins improved modestly, and the operating and net profit rose by 16% and 20%, respectively.
Given that Danaher is in so many different businesses, I strongly suggest that interested readers go to the company's website and download its presentation for the quarter. There's just too much going on to really cover it all in this format. That said, the professional instrumentation and industrial technologies segments had very good quarters once again -- core revenue growth of 5.5% and 6%, respectively, and operating income growth of 18.5% and 18.2%, respectively. Tools and components were something of a laggard (due in part to divestiture), with core revenue up 1% and operating income up 4%.
Looking at the bottom lines, free cash flow climbed 18% and return on invested capital also ticked up from the year before. That, to me, is a key consideration for an acquisition-happy conglomerate like Danaher. So long as the company continues to produce higher returns on its capital base, I'm not really concerned about the risks that supposedly go with acquisitions.
Eventually, there has to be a point of diminishing returns. No company, not even mighty GeneralElectric (NYSE:GE), can maintain a high rate of growth indefinitely. I'm not suggesting that Siemens (NYSE:SI), Agilent (NYSE:A), or Honeywell (NYSE:HON) are the problem; it's just that the better you do, and the longer you do it, the harder it gets to surpass that legacy. But that's a concern for the future. For now, though the stock isn't as cheap as I might hope, Danaher still has plenty of opportunity ahead of it.
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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).
