The calendar-year third quarter produced mixed financial results for the revenues of major publicly held analytical instrument and laboratory-product businesses. Growth in selected clinical and pharmaceutical end-markets offset continued weakness in industrial end-markets and China. Companies forecast little change for the next quarter.

Revenues for the seven businesses whose results are detailed on pages 9–11 grew 4.1%, or 5.1% on an organic basis (see page 9). Illumina recorded sales growth of more than 30%, its highest quarterly increase since the second quarter of 2011. Bruker Scientific Instruments (BSI) reported disappointing results as sales declined at a faster-than-expected rate. Pro forma Thermo Fisher Scientific Life Sciences Solutions (LSS) sales declined on a reported basis due to divestments but grew organically. Excluding Illumina, sales for the six businesses increased 1.6% on a reported basis and 2.8% organically.

Adjusted operating profits for six businesses (excluding Bio-Rad Laboratories Life Sciences [LS], which does not provide its adjusted operating profit) rose nearly 10% (including estimated pro forma results for Thermo LSS), helped by sales volume, productivity improvements and currency, with three companies showing double-digit gains. However, operating losses were reported by Agilent Technologies Life Sciences and Diagnostics (LD) and BSI due to slower sales of certain product lines. Both companies recently announced product-line exits (see IBO 7/31/14, 10/15/14). BSI, PerkinElmer and Thermo noted ongoing cost-reduction efforts, with Bruker announcing new restructuring efforts for its BioSpin division. Excluding Illumina, operating profits for the five businesses grew more than 4%.

Industrial end-markets, such as chemicals and mining, continued to be weak, as reported by BSI , Thermo and Waters. However, the academic end-market showed improvement for Agilent LD, Thermo and Waters. PerkinElmer and Waters cited continued weakness in the food-safety market due to government issues in China.

By product line, PerkinElmer, Thermo and Waters highlighted growth in service revenues. Thermo and Waters noted strong growth for chromatography and MS. But both Agilent LD and BSI reported declines in NMR sales. Also decreasing during the quarter were Illumina’s microarray sales, and sales for BSI’s AXS and Nano Surfaces divisions.

On a geographic basis, US sales remained strong, particularly for Illumina and Waters. However, Asian sales were slow for a number of firms due to China and Japan. Agilent LDA, BSI, PerkinElmer and Waters reported continued softness in China, with Bruker and Waters noting sales declines. However, Bio-Rad LS and Illumina recorded healthy sales growth in the country. Bio-Rad LS, Illumina and Waters also each reported growth in Europe.

Quarterly headwinds were particularly apparent for Agilent LDA and BSI, as both businesses missed quarterly revenue guidance and were impacted by one-time restructuring expenses. Agilent Life Sciences, Diagnostics and Applied Chemical Markets reported 3.9% growth for fiscal 2014 but forecast slower growth in fiscal 2015. Bruker lowered its 2014 sales growth forecast, while Illumina increased its 2014 revenue guidance. The information presented below is based on financial reports, SEC filings and conference calls.

Agilent Technologies

For the new Agilent Technologies, which excludes the electronic measurement business (see page 2), fiscal fourth quarter sales grew 3.8% on a currency-neutral basis to $1,043 million (see page 12). Excluding the NMR business (see IBO 10/15/14) and currency, sales grew 5% organically, led by LC, LC/MS and spectroscopy products. Instruments accounted for 51% of sales. Total sales in the Americas grew 6% to make up 36% of revenues. Excluding currency, Asia Pacific sales grew in the low single digits to account for 32%, including low-single-digit growth in China and slightly higher sales in Japan. European sales were flat to make up 32%, as higher sales in Eastern Europe and the Middle East were offset by weakness in Western Europe. Gross margins slipped 40 basis points to 53.8% of sales. Operating profit fell 1.9% to $213 million.

Disregarding the NMR impact, organic Agilent Life Sciences and Diagnostics (LD) sales and orders grew 4% and 6%, respectively. Pharmaceutical and biotechnology revenue grew 5% due to demand from large, mid-sized and specialty-pharmaceutical customers. Academic and government revenue improved 4%, led by increased government spending in the US and China. Diagnostics and Clinical sales grew 1%, as robust demand for genomics and MS products were mostly offset by lower pathology sales. NMR sales declined 49% in the quarter and were down 22% for the year. LD adjusted operating income fell 7.0% to $107 million due to the NMR impact.

Organic sales and orders for Agilent Chemical Analysis (CA) grew 6% and 9%, respectively. Forensics, food and environmental sales grew 6%, 4% and 2%, respectively, driven by government demand in the US and China. Chemical and energy sales improved 1% but were hindered by weak industrial demand in China and slower sales to the oil and gas markets. CA operating income grew 3.7% to $106 million but was flat as a percentage of sales at 24.5%.

New Agilent’s fiscal 2014 sales grew 4.3%, 5% excluding currency and the NMR impact, to $4,048 million. Adjusted operating profit grew 4.2% to $763 million. For the fiscal 2015 first quarter, sales are projected to grow 2.2%, 4.9% organically, to $1.02–$1.04 billion. Fiscal 2015 sales are expected to grow 2.5%, 5% organically, to $4.12–$4.18 billion. Adjusted operating margin is expected to improve 30 basis points in fiscal 2015 to 19.1% of sales and reach 23% of sales by 2017.

Bio-Rad Laboratories Life Science

Second quarter revenues for Bio-Rad Laboratories Life Science (LS) grew 5.5% organically to $172.8 million. Sales were driven by demand for digital PCR, timing of process-media orders, and sales of protein-separation products and traditional amplification consumables. Process-chromatography sales declined. Excluding currency, LS sales were strong in Europe, North America and emerging markets but declined in Asia-Pacific, including Japan. Despite higher sales for the quarter, Chinese sales are roughly flat year to date.

Bruker Scientific Instruments

Bruker’s third quarter Scientific Instruments (BSI) revenue was below company expectations, as sales dropped 7.1% organically to $383.4 million. Sales for all three operating segments declined, with particular weakness in Asia. In fact, demand in nearly all Asian regions, including China, declined. Overall, System revenue slumped 10.6% to make up 76% of BSI sales. Aftermarket revenue grew 9.2%. BSI adjusted operating profit declined 33.7% to $31.7 million due to currency, lower gross margin and higher SG&A costs.

Within BioSpin, NMR sales fell due to slower demand in China and Japan, and pricing competition from Japanese companies as a result of currency. This decline was partially offset by higher Preclinical Imaging sales, which are expected to achieve double-digit revenue growth for the year to make up nearly 20% of segment sales. BioSpin sales increased in the Americas but declined in Europe and Asia. Bruker MAT (BMAT) sales declined in the high single digits, including lower sales in three of its four divisions. AXS, Nano Surfaces and Elemental sales were negatively impacted by semiconductor and data-storage customers in Asia, as well as the metals, minerals and mining markets. However, the decline in Nano Surfaces was partially offset by higher sales of AFM products and the acquired fluorescence-microscopy product line (see IBO 7/31/14). Despite weakness in Asia, BMAT sales in Europe and the Americas improved. CALID sales declined due to continued export-license delays for Detection, as well as restructuring and divestment activity in Chemical & Applied Markets (see IBO 10/15/14), which negatively impacted sales by $10 million. Life Science & Clinical sales grew in the mid-single digits, including double-digit revenue growth for the MALDI Biotyper and higher QTOF MS sales. Increased Optics sales also contributed to segment growth. Given the weaker-than-expected demand in the NMR and AXS businesses and currency headwinds, Bruker further reduced its 2014 revenue outlook by 2% to $1.81–$1.84 billion, representing a slight decline on a reported basis.

Illumina

Illumina’s third quarter sales soared 33% excluding acquisitions to $480.6 million. Products sales climbed 30.6% to account for 87% of revenues. Service and Other revenue jumped 50% excluding acquisitions. Shipments in the Americas and Europe grew 37% and 40%, respectively. Despite lower demand in Japan, Asia-Pacific shipments grew 27%, led by China. Adjusted gross profit margin expanded 285 basis points to 72.6% of sales due to the product mix, increased volume and improved service margins. Adjusted operating profit soared 65.5% to $145.9 million.

Illumina’s third quarter sequencing sales grew 47%, led by record consumable revenues, instrument placements and oncology sales, which accounted for roughly 20% of revenues. Demand from reproductive-health and genetic-health customers further contributed to growth, as the number of samples accessioned for noninvasive-prenatal testing climbed 70% sequentially. Sequencing-consumables revenue grew 36% to account for roughly 42% of total sales. Shipments of sample preparation products grew 35%, led by Nextera, TruSight and RNA kits. Sequencing-instrument sales grew 55%, driven by placements of NextSeq 500 and HiSeq X Ten. With the addition of four HiSeq X Ten orders during the quarter, the product’s cumulative orders reached 164 individual units. The firm received eight multiunit HiSeq 2500 orders, of which roughly half were customer upgrades. NexSeq orders grew 15%, with a third of the orders each from new customers and commercial segments.

Illumina’s microarray sales slipped 2%. Infinium genotyping sales declined less than expected as agriculture sales grew 26%. In addition, revenues from genotyping services and IVF products increased. Illumina raised its 2014 sales- growth outlook from 25%–26% to 30%.

PerkinElmer

Adjusted organic third quarter sales for PerkinElmer grew 4.0% to $542.0 million, but were slightly below company expectations due to currency and slower food-safety sales in China. Demand was strong for newborn screening, which grew more than 20% in China, and for services in emerging markets. Total Service and Product revenues grew 5.9% and 2.9% to account for 32% and 68% of sales, respectively. All geographic figures below are organic. Sales in the Americas grew mid-single digits. Asian sales grew in the high single digits, including similar growth in China. European sales rose in the low single digits. Adjusted gross profit margin slipped 20 basis points to 47.3% of sales. Adjusted operating profit expanded 11.3% to $91.3 million due to productivity improvements. The company expects 2014 organic revenue growth of 4%–5%, which is at the lower range of its previous outlook of 4%–6%. Fourth quarter sales are expected to be $595–$605 million for growth of 1.0% at the midpoint.

Within PerkinElmer Human Health (HH), Diagnostics sales grew roughly 11% organically, led by demand for newborn and infectious-disease screening in emerging markets. Newborn-screening sales in China grew more than 20%. Prenatal-testing sales grew in the high single digits. Medical Imaging sales rose in the double digits. Research sales declined 2% organically, despite low single-digit growth in pharmaceutical and biotech markets and double-digit growth for microfluidics. This decline was attributed to lower academic- and radiochemical-product sales, and lower licensing revenue for the in vivo business. HH adjusted operating profit expanded 6.2% to $70.2 million. Within Environmental Health (EH), service revenues climbed more than 8% organically. Higher environmental sales were offset by lower food-safety sales in China. EH adjusted operating profit climbed 18.0% to $28.9 million.

Thermo Fisher Scientific Life Sciences Solutions and Analytical Instruments

Third quarter pro forma Thermo Fisher Scientific Life Sciences Solutions (LSS) sales grew 2.8% organically, driven by bioproduction, cell-biology and next-generation–sequencing products as well as human identification, animal, food and environmental applications. LSS operating profit expanded 530 basis points to 28.61% of sales as a result of the acquisition of Life Technologies (see IBO 2/15/14). The company realized $33 million and $73 million in synergy savings for the quarter and year to date, respectively, and now expects savings of more than $100 million in 2014.

Thermo Analytical Instruments (AI) sales grew 2.7% organically, led by demand for chromatography and MS systems, as well as instrument services, partially offset by weakness in China. AI adjusted operating-income margin improved 40 basis points to 17.5% of sales, as higher growth investments and unfavorable product mix were offset by favorable currency effects and productivity measures. Including Life, Thermo lowered its 2014 sales outlook by less than 1% to $16.74–$16.82 billion due to currency, but maintained its full-year organic-sales-growth outlook of 3%–4%.

Waters

Waters third quarter sales grew 7.3% organically to $493.2 million. Growth exceeded company expectations due to 12% growth in pharmaceuticals markets. Combined, industrial-chemical, nutritional-safety and environmental sales slipped 1%. Government and academic sales jumped 18%, with double-digit growth in the US and Europe each. Total organic Instrument and Recurring revenues grew roughly 6% and 9% to account for 51% and 49% of sales, respectively. Sales figures below exclude currency. US and European sales grew 8% and 9% to account for 31% and 29% of revenues, respectively. Chinese sales fell 5% to make up 11%. Sales in Japan and Other Asia grew 4% and 18% to account for 8% and 13% of sales, respectively. Sales to Other countries rose 15%, led by Latin America. Gross margin advanced 90 basis points to 59.0% of sales due to mix and volume. Adjusted operating profit expanded 14.1% to $141.6 million.

Waters Division sales rose 9% organically to account for 89% of revenues. UPLC/MS sales grew in the double digits, led by proteomics and phenomics applications. Xevo TQ-S and high-end Q-Tof MS grew. QDa Detector sales are expected to reach $20 million this year. Industrial-chemical and chemical-analysis sales fell in the mid-single digits due to weak demand in Asia and for food-safety products. Geographic sales below exclude currency. US and European sales each grew 9%, led by demand from drug and government markets. Sales to India grew in double digits due to generic-drug firms. Japanese sales grew modestly as demand from pharmaceutical and industrial-chemical markets were offset by lower government spending. Chinese sales fell in the single digits. TA sales grew 2.8% but were flat organically due to a strong comparison and lower Chinese sales.