The calendar year first quarter provided few clear trends as large publicly held US analytical and life science instrument firms experienced mixed results, with strengths and weaknesses in market and geographic segments varying by company.

The six laboratory instrument and product businesses whose quarterly revenues are detailed on pages 9–11 reported positive sales results for the calendar year first quarter (see table, page 9). Combined, these businesses’ revenues grew 23.3%, skewed by the over 70% growth for the combined sales of Thermo Fisher Scientific’s Life Sciences Solutions and Analytics Instruments Divisions due to the acquisition of Life Technologies (see IBO 4/15/13). Excluding acquisitions, sales for the six businesses increased 5.0%, led by Illumina’s strongest quarterly sales growth since 2011. Illumina also increased its sales forecast for the year.

Quarterly adjusted operating profit growth for five of the businesses (excluding Bio-Rad Laboratories Life Sciences [LS]) increased 38.1%. Excluding Life, operating profit growth for the five businesses rose approximately 6%, led by more than 20% growth for three businesses: Illumina, Bruker Scientific Instruments (BSI) and PerkinElmer. On its own, Thermo’s operating profit increased in the high single digits. In contrast, Waters and Agilent Technologies Life Sciences and Diagnostics (LD) reported operating income declines due to slower sales growth.

By end-market, pharmaceutical and biotechnology demand varied by market segment, with Agilent LD and Waters reporting good growth among small and specialty- pharmaceutical companies. However, slower sales to large pharmaceutical companies impacted Waters’s results. Similarly, sales to applied markets varied by market segment, as noted by Agilent Chemical Analysis (CA) and Waters. Agilent CA and Bio-Rad Laboratories LS both reported good growth for revenues related to food testing. The majority of companies reported continued slowness in academic and government markets, with academic and government sales declining for Agilent LD and Waters. Companies expect this sector’s sales to pick up later this year when US government funding is released. Industrial markets improved but remained lackluster, according to Bruker Scientific Instruments (BSI) and Thermo. Clinical markets were strong for Agilent LD, BSI and PerkinElmer.

Regionally, most businesses reported healthy European sales. In contrast, US sales were weaker in general, including sales results for Agilent LD, Bio-Rad Laboratories LS and Thermo. Japanese sales were strong for Illumina and Waters. Agilent LD and CA, and Thermo noted delayed releases of government funding in China. But Chinese sales grew double digits for PerkinElmer and Thermo. Emerging market–revenue growth continued to be uneven. Agilent LD and CA, BSI and Waters reported slower demand in Latin America.

By technology, Agilent CA, PerkinElmer and Waters reported strong service revenues. Among MS companies, Agilent highlighted GC/MS demand, while Bruker noted good growth for its Q-TOF MS products.

The information presented below is based on quarterly financial reports, conference calls and regulatory filings.

Agilent Technologies Life Sciences, Diagnostics and Applied Markets

Fiscal second quarter sales for Agilent Technologies Life Sciences, Diagnostics and Applied Markets (LDA) grew 2.0% organically to account for 57% of revenues. Europe was the strongest market with double-digit growth. Sales in the Americas declined 2%, including softness in both the US and Latin America. Asia Pacific sales contracted 3%, including a mid-single digit decline in China as a result of longer approval cycles and lower government spending. Fiscal third quarter LDA sales are expected to grow 5% organically to $1.00–$1.02 billion.

Within LDA, Life Sciences and Diagnostics sales grew 1% organically, as recurring revenue growth offset lower instrument sales. Pharmaceutical and biotechnology revenue increased 4%, driven by LC/MS sales and demand from mid-sized and specialty-pharmaceutical customers in Europe. Academic and government revenue fell 6% as a result of delayed research spending in the US and China. Diagnostics and Clinical sales grew 7%, led by demand for CGH microarrays, companion diagnostics and target-enrichment solutions. Sales in the Americas and Europe each accounted for 35% of LD sales, while Asia Pacific made up 30%. Segment gross margin fell 100 basis points to 53% of sales. LD adjusted operating income declined 14.6% to $76 million due to delayed orders.

Sales for Agilent Chemical Analysis (CA) grew 3% organically, led by strong demand for GC/MS, ICP-MS and services. Petrochemical and food sales grew 2% and 10%, respectively. Forensics and environmental sales fell 5% because of lower government spending in developed regions. Sales to Asia Pacific, Europe and the Americas made up 40%, 31% and 29% of CA sales, respectively. CA gross margin expanded 100 basis points to 52% of sales. Segment adjusted operating income improved 1.1% to $90 million.

Bio-Rad Laboratories Life Sciences

First quarter sales for Bio-Rad Laboratories Life Sciences (LS) grew 4.6% organically to $161.5 million due to strong demand for digital PCR systems and reagents, and the NGC chromatography system. In addition, sales for the food pathogen and process media businesses each grew in double digits. LS sales grew in double digits in Europe and were also higher in China and Latin America. However, declines were recorded in the US and Japan due to lower academic and government spending. On a reported basis, LS operating loss narrowed 48.4% to $6.6 million as a result of improved gross margins.

Bruker Scientific Instruments

Bruker’s first quarter Scientific Instruments (BSI) revenue grew 6.6% organically to $393.9 million driven by sales of MS and increased demand from research, applied and clinical markets. Despite varied demand by market, industrial sales also grew. System and aftermarket revenue increased 5.3% and 16.3% to make up 78% and 22% of BSI sales, respectively. Adjusted segment gross margin fell 220 basis points to 43.4% because of currency, pricing pressure for Bruker MAT (BMAT) products and weak Chemical & Applied Markets (CAM) sales. BSI adjusted operating margin expanded 124 basis points to 7.1% of sales as a result of lower expenses, especially at BMAT. For the company as a whole, sales grew in Europe and Asia, including China and Japan, but declined in North America and Latin America.

Bruker Chemical, Applied Markets, Life Science, In Vitro Diagnostics, Detection sales grew in the double digits driven by growth in Optics and Life Science & Clinical (LSC). LCS sales benefited from demand for the MALDI Biotyper and Q-TOF MS, especially in Europe. Optics sales were driven by new products and strong demand in the US. CAM sales were weak, and Detection sales slipped due to export delays as a result of the crisis in Ukraine. BioSpin sales grew in the mid-single digits driven by sales of MRI products, strong demand in Asia Pacific and steady growth in Europe. BMAT sales grew in the mid-single digits as demand from research and academic markets offset weak microelectronics and AFM revenues. Sales for AXS, Nano Analytics and Nano Surfaces each grew. The company maintained its full-year revenue growth forecast of 3%–4%, including similar growth for all three BSI groups. Second quarter sales are expected to be flat due to a strong year-over-year comparison.

Illumina

Illumina’s first quarter results included record revenue, orders and shipments, as organic sales jumped 24% to $420.8 million. Products sales climbed 22.3% to account for 86% of revenues. Service and Other revenue jumped 38%, excluding the acquisition of Verinata Health (see IBO 1/15/13), to make up 14%. Sales to the Americas and Europe grew 24% and 32%, respectively. Asian sales grew 22%, including continued strength in Japan. Adjusted gross profit margin advanced 110 basis points to 69.8% of sales as a result of improved instrument and service margins. Adjusted operating margin expanded 105 basis points to 27.0% of sales. The company raised its 2014 sales growth outlook by 600 basis points to 21%–23%.

Illumina’s sequencing revenue climbed 36%. Sequencing instrument sales jumped 40%, led by sales of the new NextSeq 500 and HiSeq X Ten systems and the lower-priced MiSeq and MiSeq DX systems. While the company recorded revenues for 12 HiSeq X systems, it has received total orders for 104 individual units from nine customers. As for the NextSeq system, 65 units were shipped. Sales of HiSeq and MiSeq systems also increased. Sequencing consumables revenue climbed 32% due to record sales of HiSeq and MiSeq products. Demand for MiSeq consumables was attributed to clinical customers for oncology applications, which also benefited sales of sample preparation products, which grew 16%. Sequencing service revenue included an $8 million genotyping contract that was completed during the quarter.

Illumina’s microarray sales improved 4%, led by demand for genotyping services and IVF products. Orders for the agriculture business grew 20%, led by BovineLD Plus and iSelect arrays revenues. However, microarray consumables and instruments sales declined. While lower pricing negatively impacted consumables-array revenue, demand for OncoArrays and exome-genotyping products climbed.

PerkinElmer

Adjusted and organic first quarter sales for PerkinElmer grew 5% to $533.4 million, led by service revenue and demand in Asia. All sales figures below are organic. Recurring revenue grew in the high single digits. Instrument and components revenue increased in the low single digits. Sales in the Americas advanced in the mid-single digits. Asian sales climbed in the mid-teens, including mid-single-digit growth in Japan and low double-digit growth in China. European sales were flat due to the timing of shipments in the fourth quarter 2013. Adjusted gross profit margin slipped 50 basis points to 46.8% of sales as a result of currency and higher cost-of-service revenue. Due to completed restructuring efforts in 2013, adjusted operating income margin advanced 214 basis points to 14.7% of sales. Second quarter sales are projected to grow 4%–6%.

PerkinElmer Human Health (HH) sales grew 6% organically. Diagnostics sales were driven by demand for newborn screening products and increased market shares in China. Despite higher sales of diagnostic-imaging products, Medical Imaging sales were flat. Research sales were driven by double-digit sales growth each for informatics, microfluidics and imaging products. Higher sales of radiometric detection products also contributed to sales growth. Within the Research business, pharmaceutical and biotech sales increased, while academic and government sales were mixed due to weakness in developed regions. HH adjusted operating income jumped 25.4% to $63.0 million.

Environmental Health (EH) sales grew 4% organically due to low double-digit service growth. EH product revenue was roughly flat organically, as higher demand in China was offset by weakness in the US and flat sales in Europe. EH adjusted operating profit expanded 11.5% to $26.0 million.

Thermo Fisher Scientific Life Science Solutions and Analytical Instruments

Based on new segments (see IBO 1/15/14), which includes the acquisition of Life Technologies as of February 4 (see IBO 2/15/14) and divested product lines as of March 22 (see IBO 1/15/14), first quarter Thermo Fisher Scientific Life Sciences Solutions (LSS) sales rose nearly fourfold. The existing LSS business, which comprises the transferred Biosciences businesses, grew 3.0% organically. Including Life’s total first quarter 2014 and 2013 revenues, pro forma LSS sales grew 1% organically due to strong Bioproduction sales. Demand for qPCR and next-generation sequencing products also contributed to growth. However, segment sales were partially offset by lower OEM licensing royalties and weak Sanger sequencing sales. LSS adjusted operating profit rose nearly fivefold to $244.6 million due to the acquisition. Segment operating margin was 29.3% of sales. For 2014, pro forma LSS sales are expected to grow 2%–3% organically.

Thermo’s Analytical Instruments (AI) sales grew 3.7% organically led by strong growth in the life sciences MS, LC and IC businesses as well as increased demand for portable analytical systems from industrial customers. Segment sales were strong in Europe and Asia Pacific, including India. AT adjusted operating income expanded 8.6% to $130.9 million. AT adjusted operating income margin advanced 72 basis points to 17.0% of sales due to improved productivity. Thermo maintained its 2014 total organic sales growth outlook of 3%-4% to $16.8–$17.0 billion. The Life acquisition, net of divestitures, is projected to add 26% to revenue growth.

Waters

Waters reported flat organic sales of $430.5 million for the first quarter primarily due to delayed capital spending from pharmaceutical customers. Despite headwinds from US weather conditions, recurring revenues climbed 5.3% to account for 51% of sales due to increased service maintenance contracts. Instrument sales declined 5.0% to make up 49% of revenues. Pharmaceutical sales grew 1%, combined industrial chemical, nutritional safety and environmental sales slipped 1%, and government and academic sales fell 6%. All sales figures below exclude currency. Sales in Europe and Japan grew 2% and 8%, respectively. Asian sales (excluding Japan) grew 1%, including 3% growth in China and flat sales in India. Sales to the US declined 2% and were each lower in Latin America and Canada. Gross margin contracted 300 basis points to 56.4% of sales because of currency. Adjusted operating margin dropped 306 basis points to 23.2% of sales. Second quarter organic sales are projected to grow at or above the mid-single digit range.

Within the Waters Division, first quarter sales improved 0.6% to account for 89% of revenues. Growth was driven by demand for the new QDa Detector, chromatography consumables and maintenance contracts. Sales of UPLC-MS fell below expectations, especially for tandem-quadrupole MS systems, as demand for food- and environmental-testing applications slowed in Asia, Latin America and Europe. Sales of Q-Tof MS also contracted due to a strong year-over-year comparison. All geographic sales figures below for the Waters Division exclude currency. US sales declined slightly, including weakness among chemical analysis customers and flat growth in the pharmaceutical markets. Latin American sales contracted due to lower government and academic spending and weak demand for food and environmental applications. European sales were roughly flat, as strong pharmaceutical sales were offset by lower government and academic revenue. Japanese sales grew in the high single digits, led by government and academic sales and expanding industrial chemical demand.

Waters’s TA Division sales fell 4.1% due to weak demand from developing regions and lower US sales. While sales of thermal-analysis systems varied by region, sales of rheology systems were strong. For the year, TA sales are projected to grow in the mid-single digits organically.