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Agilent Gets Unexpected Chemical and Energy Boost

Agilent Technologies reported strong fiscal second quarter financial results, as sales advanced 8.1%, 8.7% organically, to $1.10 billion (see Bottom Line). Acquisitions, net of divestments, added 0.3% to revenue growth, while currency headwinds reduced growth by 0.9%. The stronger-than-expected quarter was driven by increased capital expenditure by chemical and energy customers, as well as continued strength in biopharmaceutical and China markets.

All sales figures below are based on organic growth. Chemical and energy sales climbed 14%, despite continued weakness in exploration. The company noted strong demand from chemical and refining customers, with strength across all geographic regions and product categories. Demand also improved from materials characterization and mining customers.

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Biopharmaceutical sales advanced 12% despite a strong comparison, driven by new products, technology upgrades and particular strength in the nucleic acid contract manufacturing business.

Environmental and forensics revenue expanded 7%, as softness in the forensics market was more than offset by healthy environmental sales. Following 25% growth in the previous year, sales growth for the food business decelerated to 1%. Academic and government sales remained challenged, sliding 2%.

By segment, Life Sciences and Applied Markets Group (LSAG) sales advanced 6%, led by sustained demand for chromatography, MS, spectroscopy and cell analysis products. GC sales were also healthy, climbing in the high single digits, driven by demand for the 7890 product line due to strength in the chemical and energy, and environmental markets.

CrossLab Group sales advanced 10%, led by increased spending by chemical and refining customers, as well as strong revenue growth from contract services and consumables.

Diagnostics and Genomics Group (DGG) sales jumped 13%, including strong demand for pathology, companion diagnostics and nucleic acid solutions, especially in China and Japan.

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Agilent sales grew 10% in Europe to make up 27% of revenues. With the exception of academic and government sales, demand in this region was healthy across all other customer end-markets. Accounting for 39% of revenues, sales in Asia Pacific advanced 10%, including 11% in Japan. Sales in China, which advanced 7%, expanded at a slightly lower pace due to a particularly strong comparison. Sales in the Americas improved 6% to make up 34% of revenues.

Adjusted gross margin expanded 140 basis points to 56.0%. Adjusted operating margin advanced 270 basis points to 21.8% due to cost control measures and previous restructuring. Despite the strong quarter, Agilent increased its fiscal 2017 organic sales growth outlook by a conservative 50 basis points to 5.0%. On a reported basis, fiscal full-year sales are expected to grow 4.0% to $4.36–$4.38 billion. Third quarter sales are projected to grow 2.5%, 4.0% organically, to $1.06–$1.08 billion.

Timing Impairs BD Biosciences Growth

Fiscal second quarter revenue for Becton, Dickinson’s BD Biosciences unit declined 2.8%, 1.8% excluding currency, to $269 million to make up 9% of company revenues. Segment sales were negatively impacted by timing of instrument orders in Asia and Europe. Supply issues caused by damaged inventory for certain research reagents further hampered segment sales growth and operating margins. The bottom line was also impacted, as the company recorded a write-off of the affected inventory. Excluding the supply shortages, BD Biosciences sales would have declined less than 1%.

BD Biosciences sales in the US were flat, as strength in the Advanced Bioprocessing business was offset by the reagent fulfillment issues. International segment sales contracted due to timing of instrumentation orders and, to a lesser extent, lower sales in the clinical HIV business in Africa.

PCR Drives Bio-Rad LS Sales

First quarter sales for Bio-Rad Laboratories’ Life Science segment (LS) advanced 5.1% on both a reported and organic basis to $174.3 million, accounting for 35% of revenues. The acquisition of RainDance (see IBO 1/31/17) added 1.2% to sales growth but was offset by currency headwinds.

The company reported strong quarterly demand for Droplet Digital PCR and PCR food testing products, as well as a positive uptake for the new western blotting imager. Higher sales of amplification and cell biology products further contributed to revenue growth, but were partially offset by lower demand for process media products.

Geographically, LS sales were strongest in Europe, China and other Asia Pacific regions outside of Japan. North American sales declined due to lower process media revenues, which were particularly strong in the previous year.

For 2017, total Bio-Rad sales are projected to grow 4% excluding currency. RainDance is projected to add $18–$20 million to annual sales but reduce operating income by $7–$10 million. The company expects the acquisition to be accretive within the first 18–24 months.

Biotage Achieves Record Results

Following several quarters of strategic investments to expand its direct sales presence, Biotage delivered record quarterly sales and operating profit. For the first quarter, sales climbed 16.6%, 12.9% excluding currency, to SEK 185.2 million ($20.8 million at SEK 8.92 = $1).

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Sales for all major product areas grew more than 10%, including particular strength for Organic Chemistry products. Driven by robust demand in the biopharmaceutical markets, peptide system sales soared more than 100%. In addition, evaporation system sales climbed more than 50% due to continued demand for the V-10 Touch and Isolera systems. Isolera system sales were particularly strong in China. Overall, system and aftermarket products sales accounted for 47% and 53% of revenues, compared to 44% and 56% in the previous year, respectively.

Geographically, sales were robust in China, climbing 58%. Furthermore, as the company expanded its direct sales presence in South Korea, sales for this region jumped more than 150% to account for 2% of revenues. Revenues in all countries represented by a direct sales force grew more than 10%.

Gross margin expanded 380 basis points to 60.9% due to improved efficiency, stronger sales volume and favorable exchange rates. As such, operating margin climbed 440 basis points to 18.9%.

Instrumentation Sales Propel Bio-Techne Growth

For the fiscal third quarter, Bio-Techne’s life science research–related sales (Biotechnology and Protein Platforms segments) grew 16.8%, 9% organically, to account for 82% of revenues. Acquisitions contributed 10% to sales growth, while currency negatively impacted revenue growth by 2%. Growth benefited from strong instrument placements, as well as healthy antibody and assay product sales.

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Biotechnology segment sales advanced 6% organically. This growth was driven by double-digits sales growth for Novus Biologicals antibodies, as well as healthy sales of Luminex products and royalties. Sales for the acquired Advanced Cell Diagnostics business (see IBO 7/15/16) jumped nearly 60% on a standalone basis. However, adjusted operating margin for the segment contracted more than seven-and-half percentage points to 47.9% due to acquisitions.

Bio-Techne’s Protein Platforms segment expanded 20% organically, led by double-digits sales growth for its new imaging capillary electrophoresis platform. Sales for its legacy imaging platforms were roughly flat. Demand for the SimplePlex ELISA system was particularly strong, as sales soared more than 75%. Simple Western sales also contributed to growth, led by record Wes shipments. Adjusted operating margin for the segment jumped nearly six percentage points to 13.8% due to increased sales volume.

Geographically, life science research–related sales grew more than 20% in Europe, including robust demand from smaller biotechnology firms and high single digit sales growth in academic markets. Sales in China grew in the low teens, as strong demand for Western products was partially offset by lower PrimeGene sales because of regulatory amendments. In other Asian regions, Japanese sales grew for the first time in several years, and sales in South Korea climbed double digits, driven by sturdy reagent and instrumentation revenues. US sales grew in the low single digits, slightly below company expectations. The company maintained its fiscal 2017 organic sales growth outlook of roughly 6% or slightly higher.

System Sales Down for Bruker

Sales for Bruker’s Scientific Instruments (BSI) segment slipped 1.1%, down 1.2% organically, to $346.4 million to account for 90% of revenues. Acquisitions added 1.9% to sales growth but was mostly offset by currency headwinds of 1.8%. Sales growth was negatively impacted by a strong year-over-year comparison, which included delivery of a 1GHz magnet NMR system and large Detection order in the previous year. Furthermore, instrumentation sales were hampered by weak European academic bookings in 2016. Overall, system revenues declined roughly 5% organically, while aftermarket sales climbed 9% organically to account for 71% and 29% of BSI revenues, respectively.

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Bruker BioSpin sales increased in the low single digits organically despite the 1GHz NMR delivery in the previous year. NMR demand remained healthy, including strength in China from academic and industrial customers. In addition, sales for the aftermarket and services business, LabScape, grew in the high single digits. This growth was partially offset by lower Preclinical Imaging sales.

Bruker Nano sales grew approximately in the mid-single digits organically, led by strong demand for automated AFM products within the semiconductor metrology tools business. Bruker AXS sales also improved following weak demand in the previous year. The acquisition of Hysitron (see IBO 1/31/17), which offers nanomechanical test instruments, boosted sales growth for the Nano Surfaces business.

Bruker CALID sales contracted in the high single digits organically, as Detection sales dropped sharply due to the timing of orders in the previous year. Furthermore, Daltonics MS sales were negatively impacted by lower European academic bookings in 2016.

BSI adjusted operating margin improved around 50 basis points to 13.7% due to cost control and restructuring measures within the CALID and Nano Groups, as well as product mix and favorable NMR pricing.

BSI sales in Europe declined in the high single digits organically; however, orders for the region increased for the second consecutive quarter. Japanese sales were also challenged. In contrast, sales in Asia Pacific grew close to double digits, including particular strength in China from academic and industrial markets. North America organic sales were modestly higher. Bruker reiterated its 2017 organic sales growth outlook of 1%–2%. However, the company raised its reported sales growth range from 1.5%–2.5% to 2.0%–3.5% to account for favorable currency fluctuations.