Danaher delivered third-quarter earnings of $0.84 per share, a 9% increase versus the prior year. The company reaffirmed its full-year earnings guidance, which was higher than our full-year estimates. We have increased our fair value estimate to $62 per share to reflect better-than-expected performance and cash earned since our last report. The resiliency of Danaher’s earnings and cash flows through this cycle reinforce our narrow economic moat rating.

Danaher grew core revenue 3% versus the prior year, with acquisitions contributing an additional 3% of revenue growth offset by 0.5%. The company’s life sciences and diagnostics segment led the firm in revenue growth, growing core revenue 6% year over year, followed by environmental and dental at 4.5% and 3.5%, respectively. The two more industrial-oriented businesses struggled in the quarter as capital spending remains tepid, dampening revenue growth prospects. That said, the company noted strength in some of the underlying businesses within industrial, most notably recent addition, X-Rite.

Operational execution remains a key strength for Danaher, boosting bottom-line results in somewhat weak revenue cycles. The company expanded operating margins 30 basis points versus the prior year to 17.4%, with the medical businesses driving the improvement. We view the source of strength as validation of the ability of Danaher’s Business System to apply to any type of operation.

This key organizational strength allows the company to be successful in delivering synergies from acquisitions. Finally, Danaher’s free cash flow remains healthy, through three quarters the company has delivered $2.1 billion in free cash flow during the quarter ($2.98 per diluted share). Given the company’s mounting cash balance and strong cash flow generation we anticipate more acquisitions from the company in the coming quarters.