Agilent Maintains Cautious Outlook

Agilent Technologies’ fiscal fourth quarter revenues ending October 31 fell 0.8% to $1.04 billion, in line with expectations. Excluding currency and divestments, which reduced revenue growth by 6.4% and 0.6%, respectively, organic sales rose 6.2%. All sales figures are organic. Sales to analytical lab markets grew roughly 6% to account for 86% of revenues. Sales to pharmaceutical and biotechnology markets jumped 19% due to technology upgrades, new products and aftermarket demand. Environmental sales were flat, as strength in China was offset by lower instrument sales in the US. Food sales expanded 4%, led by demand in China. Forensics revenues were flat due to the timing of several large orders. Chemical and energy sales improved 1%. Academic and government sales contracted 4% because of lower US government spending. Sales to diagnostic and clinical markets grew 7% to account for 14% sales, including strength for NGS target enrichment and record shipments of Dako’s Omnis system. Organic sales in the Americas and Asia Pacific (excluding Japan) each grew 7.0% to account for 37% and 27% of revenues, respectively. Organic sales in Europe and Japan expanded 5.5% and 3.3% to make up 30% and 5%, respectively. Adjusted gross margin improved 80 basis points to 54.6%. Adjusted operating profit grew 4.7% to $223 million.

Life Sciences and Applied Markets Group (LSAG) sales grew 2.0% organically. Strength in pharmaceutical markets was offset by soft demand from industrial, and academic and government markets. LSAG gross margin slipped 20 basis points to 56.9%, and adjusted operating margin also declined 20 basis points to 20.0%. Sales for the Crosslab Group (ACG) jumped 10.8%. Demand was strong for LC columns and services. ACG gross margin advanced 180 points to 50.3%, and adjusted operating margin expanded 150 basis points to 25.1%.

Fiscal 2015 sales grew 6.4% organically, the fastest organic annual growth since 2011. Organic sales in the Americas, Europe and Asia Pacific (excluding Japan) rose 7.0%, 7.4% and 7.2% to account for 35%, 32% and 28% of sales, respectively. Sales in Japan fell 4.9% organically to make up 5%. Adjusted gross margin grew 20 basis points to 53.7%. Adjusted operating profit rose 0.5% to $767 million.

Agilent maintained conservative guidance for fiscal 2016. At the midpoint, sales are projected to grow 3%, 4.3% organically, to $4.15–$4.17 billion. Adjusted operating margin should expand by at least 100 basis points to 20.0%–20.5% in fiscal 2016 and reach 23.0% by fiscal 2017 for a total gain of 400 basis points. Fiscal 2016 first quarter sales are projected to decline 1.6% to $1.00–$1.02 billion but grow 3.5% organically.

Bio-Rad Sales Disrupted

Third quarter sales for Bio-Rad Laboratories Life Science (LS) fell 13.0%, 5.9% organically, to $150.4 million to account for 32% of revenues due to lower demand for protein purification and quantification products. In addition, supply chain and production issues following implementation of a new software system reduced growth by 3%–6%. In contrast, sales improved for digital PCR products and western blotting systems. LS sales in the US were significantly impacted by disruptions from the software adoption. Excluding currency, LS Asia Pacific sales declined, while revenue in Europe grew at a modest pace. LS gross margins improved 90 basis points due to a closed manufacturing facility. On a reported basis, LS operating loss widened 16.0% to $12.3 million. The company reduced its full-year LS revenue outlook.

Merck KGaA Gains on Bioprocess

Third quarter sales for Merck KGaA Life Science jumped 14.9%, 8.1% excluding currency, to €759.4 million ($843.8 million = €0.90 = $1) to make up 24% of revenues. All sales figures below are organic. Process Solutions sales climbed 13.8% to make up 48% of Life Science revenue. This growth was driven by demand from biopharmaceutical customers, especially for virus removal and purification products in the US, Europe and India. Lab Solutions sales advanced 3.6% to make up 38%, including higher sales of lab water consumables, as well as biomonitoring and OEM diagnostics products. Bioscience sales grew 3.0% to make up 14%, as demand for cell biology and cell culture systems was partially offset by lower demand for reagents and antibodies in North America and Europe. Life Science sales in Europe grew 8.7%, led by demand for bioprocess and biomonitoring products, as well as higher sales of molecular and cell biology systems. North American sales grew 7.1% with strong demand for viral clearance, purification and single-use products, but moderate LS sales growth and lower Bioscience sales. Asia-Pacific sales grew 7.2%, with particular strength in India, Singapore and South Korea. Latin American sales rose 13.4%, leading growth across all three businesses. In the Middle East and Africa region, sales improved 0.7%. Life Science gross margin expanded 224 basis points to 58.1% due to a favorable product mix and pricing, as well as manufacturing efficiencies. Adjusted operating profit climbed 29.5% to €171.8 million ($190.9 million).

Shimadzu Ascends on Currency and Overseas Growth

Shimadzu Analytical and Measuring Instrument (AMI) fiscal 2016 second quarter sales grew 9.8%, 4% excluding currency, to ¥54.4 billion ($445.1 million = ¥122.19 = $1) to represent 61% of revenues. Operating profit jumped 24.0% to ¥9.5 billion ($ 78.0 million). For the first half of the fiscal year, AMI sales advanced 13.9%, roughly 7% excluding currency, to ¥97.6 billion ($801.1 million = ¥121.78 = $1). All sales figures below exclude currency.

Fiscal half-year sales were driven by strong LC and MS demand in North America from pharmaceutical and therapeutics customers. North American sales grew in the low double digits to account for 14% of AMI revenue. South American sales declined in the high single digits to make up 2%. In spite of challenges in Russia, European sales grew roughly 10% to account for 11%, driven by LC sales to pharmaceutical and chemical markets in Western Europe. In China, sales benefited from demand for LC, GC and MS from government customers, as well as increased demand from public sector pharmaceutical and chemical customers. LC sales from pharmaceutical markets were also strong in Southeast Asia and India.

Sales in China and Other Asia grew in the mid-single digits and strong double-digits to make up 22% and 11% of AMI revenue, respectively. Japanese sales grew 4.7% to represent 38%. Regional sales rose for LC, testing machines, MS and GC due to pharmaceutical, chemical and steel customers, as well as for water quality products for government markets. AMI operating income climbed 34.6% to ¥14.2 billion ($116.7 million), benefiting from currency. Shimadzu raised its fiscal 2016 sales and net income outlook by 1% and 9% to ¥340 billion ($2.8 billion) and ¥23 billion ($192 million) for growth of 8.0% and 24.7%, respectively.

Waters Growth Continues to Flow

Third quarter sales for Waters grew above firm forecasts, climbing 1.5% to $500.6 million. Excluding currency headwinds of roughly 7.1% and a 0.5% contribution from acquisitions, organic sales rose 8.1%, driven by pharmaceutical demand, especially from generic, clinical and smaller specialty customers. Double-digit revenue growth from government and academic sales in China and the US, as well as strong applied markets in Asia, contributed to organic growth. All sales figures below exclude currency.

Within the Waters Division, pharmaceutical sales climbed 10%. Sales to food, environmental and industrial chemical markets grew in the midteens, including significant growth for food testing. Government and academic revenue were flat due to a strong comparison and conflicting geographic demand, as strength in the US, China and Japan was offset by declines in emerging markets. Sales for high-resolution MS systems were challenged because of double-digit growth last year.

Waters Division sales in the US climbed 13%. European sales grew 9%, including mid-single digit growth in pharmaceutical markets, and double-digit government and academic sales growth. Growth was focused primarily in Western Europe, as Eastern European sales declined. Sales were also strong in China, and sales in India grew double digits. Japanese sales grew in the low single digits, as strength from academic and government, as well as applied markets was offset by a tough comparison for pharmaceutical sales. Rest of World sales declined in upper single digits, including significant weakness in Latin America due the economic contraction and a tough comparison. TA Division sales fell 3% organically, as growth in the US and China was offset by weakness in Europe and Japan.

Waters margins slipped 31 basis points to 58.7% of sales. Despite currency benefits, adjusted operating profit fell 1.0% to $140.1 million. Waters raised its fourth quarter sales growth outlook by 100 basis points to 4%–5% excluding currency, including a 2%–3% decline from fewer selling days. Full-year currency-neutral sales are projected to grow 8%–9%. Fourth quarter and year-end forecasts exclude estimated acquisition contributions of 0.5% and 0.4%, respectively.