Can Danaher's Diagnostics Unit Sustain Growth Amid Lower Sales in China?

Danaher Corporation’s DHR Diagnostics segment continues to contribute steadily to its overall performance. The segment’s core revenues increased 2% on a year-over-year basis in the second quarter of 2025.

Solid momentum in the clinical diagnostics businesses, led by growth in the Beckman Colter Diagnostics unit, has been buoying the segment’s performance. In the second quarter, core revenues from the clinical diagnostics businesses rose in low single digits. In the quarter, Beckman Coulter Diagnostics unit delivered high single-digit core revenue growth outside China. This marks its fourth consecutive quarter of achieving mid-single-digit or higher growth driven by rising demand for products like DxC 500i Clinical Analyzer and DxI 9000 Access Immunoassay Analyzer.

Recovery in the molecular diagnostics business, driven by an increase in demand for non-respiratory disease tests, has been supporting the performance of the Diagnostics segment as well. However, lower sales in China, owing to volume-based procurement program and healthcare reimbursement changes, are concerning for the segment.

In the quarters ahead, Danaher’s Diagnostics segment is expected to balance these headwinds with continued product innovation and by offering a wider variety of new diagnostic tests. While challenges in China may persist, steady international growth and rising demand for advanced diagnostic solutions position the segment to remain a resilient contributor to the company’s overall performance. For 2025, Danaher anticipates core revenues from the Diagnostics segment to be flat to increase in low single-digits on a year-over-year basis.

Segment Snapshot of DHR's Peers

Among its major peers, Labcorp Holdings Inc.’s LH Biopharma Laboratory Services segment generated net sales of $784.8 million in the second quarter of 2025, up 11% year over year. This was driven by Labcorp’s strong drug development capabilities and scientific expertise. Labcorp derived 22.1% of its total revenues from this segment during the quarter.

CVS Health Corporation’s CVS Health Services segment reported net sales of $46.5 billion in the second quarter of 2025, up 10.2% year over year. CVS Health generated 47% of its total sales from this segment in the quarter. Favorable pharmacy drug mix and brand inflation aided CVS Health’s segment’s results in the second quarter.

Price Performance, Valuation and Estimates

Shares of Danaher have lost 30.5% in the past year compared with the industry’s decline of 18%.

From a valuation standpoint, DHR is trading at a forward price-to-earnings ratio of 23.41X, above the industry’s average of 15.05X.

The Zacks Consensus Estimate for DHR’s 2025 earnings has increased 0.9% over the past 60 days.

The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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