Agilent Shines

Agilent Technologies topped fiscal second quarter expectations as sales climbed 5.8%, 8.0% organically, to $1.0 billion. Currency headwinds and divestments impacted sales growth by 1.3% and 0.8%, respectively. Organic sales were driven by strong double-digit growth in China, especially in food and biopharmaceutical markets. Sales further benefited from enhanced revenue cycle times as well as shipping delays in the previous year, which added roughly 2.3% and 1.5% to sales growth, respectively.

Sales for a majority of end-markets and geographic regions expanded with the exception of the chemical and energy markets, which declined 3%, and Japan. All sales figures below are based on organic growth. Food sales jumped 25%, with strength in China and the US. Pharmaceutical sales climbed 14% due to technology upgrades, new products and higher aftermarket sales. Academia and government revenue grew 7%, led by China and US demand for target enrichment and array CGH products. Chinese demand was also strong for environmental and forensics sales, which grew 6%.

By segment, Life Sciences and Applied Markets Group (LSAG) sales advanced 8% organically but included roughly 3% growth from the delayed shipments in the previous year. Adjusted LSAG operating margins expanded 320 basis points to 19.0% due to the NMR divestment (see IBO 3/31/15), cost control and higher volume.

Agilent CrossLab Group (ACG) sales grew 10% organically, led by higher revenues from contract services, LC columns and lab supplies, especially in Asia. Diagnostics and Genomics Group (DGG) sales expanded 5% organically. Within the genomics business, demand for SureSelect target enrichment and array CGH products were highlighted. Both ACG and DGG adjusted operating margins were flat at 21.5% and 15.0%, respectively.

Overall, sales in the Americas, Asia Pacific and Europe accounted for 34%, 37% and 29% of total sales, respectively. Adjusted operating margin expanded 160 basis points to 19.1% due to restructuring. The company projected continued double-digit revenue growth in China and from biopharmaceutical customers in the fiscal second half of 2016. Given the greater-than-expected impact of the refining sector, the company reduced its projected sales growth outlook for the chemical and energy market from flat to a decline of 2.5%–3.0%. Agilent raised its fiscal 2016 sales outlook by $60 million to $4.17 billion for organic growth of 4.5%, primarily due to reduced currency headwinds. Fiscal third quarter sales are expected to grow 1.3% organically because of the timing of revenues.

Strong Process Sales for Merck KGaA

First quarter sales for Merck KGaA’s Life Science (LS) division jumped 89.3%, 8.9% organically, to €1.4 billion ($1.5 billion = €0.91 = $1) to make up 38% of revenues. The Sigma-Aldrich acquisition (see IBO 9/30/14) contributed 81.6% to revenue growth. Currency lowered sales growth by 1.3%, primary due to headwinds in Latin America.

All sales figures below are organic. Process Solutions sales advanced 15.9% to make up 46% of LS revenue, driven by demand for downstream and purification products, especially in Europe, Asia-Pacific and Latin America. Applied Solutions sales grew 3.6% organically, led by demand for biomonitoring, as well as water and food testing products. Research Solution sales expanded 2.0% organically, driven by sales of multiplex reagents in the US and increased activity in biologics research.

European sales climbed 13.7% to make up 36% of Merck LS revenue due to demand for filtration and chromatography products. North American sales grew 5.8%, expanding from 31% to 36% of LS revenues due to Sigma-Aldrich. Asia-Pacific sales advanced 3.8% to make up 22%, including double-digit growth in China, but declined in Japan and Singapore. Latin American sales accounted for 4%, jumping 18.1%, including double-digit sales growth in Process and Applied Solutions. Research Solutions sales were also strong in this region as well as in the Middle East and Africa, for which total LS sales grew 6.4% organically to account for 2%.

Adjusted LS operating margin climbed 310 basis points to 24.3% due to the acquisition, product mix and synergies. For 2016, LS sales are projected to grow in the mid-single digits organically, led by Process Solutions.

China Spurs PerkinElmer Growth

Adjusted first quarter sales for PerkinElmer advanced 2.2%, 3.8% organically, to $538.8 million. Currency lowered revenue growth by 2.0%, while acquisitions, net of divestments, added 0.3%. Revenue growth slightly exceeded company expectations due to lower currency headwinds as well as strength in food and environmental markets in China. Biopharmaceutical sales also sustained healthy demand, growing in the high single digits. In spite of weak spending in Japan, academic and government sales were stable. Industrial sales declined in the low single digits because of a strong comparison and weak demand for material characterization products. Overall, product sales were balanced, as consumables, reagents and instruments sales each grew in the mid-single digits organically. Pricing contributed to consumables and reagent revenue growth, and sales of new products added roughly 3.4% to total revenue growth.

China grew in the mid-teens, but benefited from timing of revenues. Total sales in Asia grew in the high single digits, including a roughly 3% decline in Japan. European sales grew in the mid-single digits, and sales in the Americas grew in the low single digits. Sales in other emerging markets such as Brazil and Russia declined.

PerkinElmer’s Human Health (HH) revenue grew 3% organically. Core diagnostic sales grew roughly 6%, led by newborn and infectious disease screening and growth in the Haoyuan blood screening business. This was partially offset by lower medical imaging sales, which declined in the mid-single digits organically. The life science solutions business, which includes core research, informatics and service revenues, grew roughly 4% organically. Specifically, core research sales grew in the mid-single digits organically, led by demand for OneSource services, new products as well as double-digits sales growth for reagents. Sales for the microfluidics business grew in the high single digits, led by demand from NGS labs. However, informatics sales declined. Despite improved pricing, HH adjusted operating margin declined 83 basis points to 21.2% following increased product development expenses.

Environmental Health (EH) sales advanced 5% organically, led by increased activity in food, air and water testing in China, as well as higher laboratory service revenue. Sales for the Perten business grew double digits. EH adjusted operating margin soared 474 basis points to 15.0% due to restructuring measures, product mix and significant cost control.

PerkinElmer adjusted gross profit margin advanced 34 basis points to 48.0%. Adjusted operating income margin grew 100 basis points to 16.7% due to productivity improvements and product mix. The company slightly raised its projected 2016 organic growth outlook to 4%, which was the top range of its previous guidance. Second quarter sales are expected to grow at a similar rate to $570–$575 million.

VWR Breaks Record

VWR recorded its strongest quarterly organic growth ever due to healthy demand for equipment and instruments from US biopharmaceutical and government customers. Private label sales maintained growth in its projected 8%–10% range. First quarter sales rose 6.7%, 6.0% organically, to $1.10 billion. Currency reduced sales growth by 1.9% but was offset by acquisition contributions of 2.6%.

Sales for VWR’s Americas segment grew at a record organic growth rate of 7.6%, led by double-digit sales growth in both the biopharmaceutical and government markets. Biopharmaceutical growth was highlighted by bioproduction sales, as well as by demand from biotechnology, medical device and CRO customers. Health care sales grew in the 5% range, led by demand from reference labs and hospitals. Industrial sales also grew roughly 5%, with growth in food and beverage, and industrial chemical markets. Despite higher sales to university customers, education sales were flat. By product, chemicals, and equipment and instrument sales each grew double digits. Consumables sales improved in the mid-single digits. Americas adjusted operating margin improved 60 basis points to 6.5% due to higher sales volume.

EMEA-APAC sales grew 3.6% organically but were modestly hindered by two fewer selling days because of the timing of Easter. Biopharmaceutical sales grew in the high single digits, including broad demand from biotechnology markets and strong equipment sales to pharmaceutical customers. Health care and industrial sales each grew in the mid-single digits. Industrial sales were driven by the food and beverage, microelectronics, paper and agriculture markets, partially offset by lower demand from mining, electric gas and utilities customers. Conversely, both education and government sales declined in the mid-single digits. Chemicals as well as equipment and instrument sales each grew in the low single digits. Consumables sales advanced in the mid single digits. EMEA-APAC adjusted operating margin slipped 60 basis points to 8.4% primarily due to timing of the holiday.

Gross profit margin was unchanged at 28.3%, as pricing momentum was offset by product mix. Adjusted operating margin rose 10 basis points to 7.3%. VWR raised its 2016 sales guidance by $50 million to $4.54–$4.63 billion for growth of 5%–7%. Excluding the projected 2% growth from acquisitions and modest currency impact, the 2016 organic growth sales outlook of 3%–4% was unchanged.