Danaher's margin tops its guide while like-for-like sales growth holds steady

Danaher sells the instruments, consumables and diagnostic tests that drug makers, research labs and hospitals buy, and its earnings per share for the September 2026 quarter rose 34.5% on a GAAP basis. Most of that jump came from a single accounting item: the company booked a net tax benefit of $263 million, mainly from releasing reserves it held against uncertain tax positions after settling tax audits. Strip that benefit out and GAAP earnings per share rose 5.5%, calculated from the reported figures. The company's adjusted measure, which already leaves the tax item aside, rose 11.5%.

The adjusted figure is the better guide to the business, and what has surprised this year is margin. Adjusted operating margin, which excludes acquisition amortisation and the charges the company treats as one-off, was 29% last quarter, against roughly 26.5% the company had guided in July. The two earlier quarters of the year also came in above their guides. The chief financial officer, Matthew Gugino, said the margin was "driven primarily by strong operational execution with a modest benefit from tariff refunds received during the quarter". Each beat has helped lift the earnings outlook: full-year adjusted earnings per share guidance now stands at $8.57 to $8.62, above the range the company set in January.

Growth needs a closer read. The company said core sales growth excluding respiratory testing, a measure that also leaves out acquisitions and currency, rose to 5.5% last quarter, faster than the quarter before. From this quarter, though, core growth also excludes tariff refunds the company has received and is handing back to customers. That exclusion added 1.0 point to total-company growth. The change has a logic: a refund passed on lowers sales, while the refund received lowers costs. But it alters the comparison. Measured as the company measured it up to the second quarter, growth excluding respiratory was about 4.5%, calculated by taking the point back out. That is level with the quarter before. On the new definition, the 5.5% is above the roughly 5% the company guided in July. The release gives these rates in half-point steps, so the like-for-like figure is approximate.

The total growth outlook for the year has moved the other way. The company now expects core growth of about 2.5%, below the bottom of the range it gave in January, and that figure is on the new definition. The company now plans for about $1.5 billion of respiratory testing sales this year, less than it planned in January; these are flu and similar tests whose demand depends on how severe the season is. Excluding respiratory, growth over the first nine months fits the mid-single-digit pace the company expects for the full year.

That is the background to the first view of 2027 from the team led by chief executive Julie Sawyer Montgomery. Gugino called "4% to 5% core revenue growth, excluding respiratory revenue" the right starting point, with detailed guidance due in January. That is the same range the company guides for the current quarter, and close to where the measure has run over the past year. Montgomery also treated this year's respiratory figure as the base for next year, which, if it holds, would remove this year's drag from total growth. The starting point, in other words, assumes the business keeps its recent pace. This year the surprises came from margins; the growth rate has not yet changed on a like-for-like basis.