Bruker Tops Estimates

Bruker Scientific Instruments (BSI) delivered robust third quarter organic sales, led by increased government funding, strong NMR and MS sales, and timing of orders. Excluding currency and divestments, sales rose 9.2% to $366.6 million to account for 93% of revenues. System and aftermarket revenues grew roughly 7% and 16% organically to make up 74% and 26% of BSI sales, respectively.

Bruker CALID sales grew double digits organically, led by strong demand in Europe and Asia, including China. Sales were particularly strong for the Detection business. The Daltonics business experienced growth across most product lines and geographies. In addition, increased government funding boosted sales of MS products, especially FTMS, MALDI Biotyper and MALDI-TOF products. Organic sales for the Optics business were flat.

Bruker BioSpin sales were strong due to a rebound in NMR sales across all major geographies, but also benefited from timing of deliveries and a strong backlog. Year to date, NMR orders are up in the high single digits. Sales for the Preclinical Imaging (PCI) Division, which accounts for roughly 20% of group sales, grew in the mid-single digits organically due to demand for preclinical MRI products. Despite strong PCI sales, orders continued to decline and resulted in additional restructuring measures within the molecular imaging business to maintain profitability.

Bruker Nano organic sales and orders fell due to weak industrial demand. The slow demand from industrial markets, and semiconductor and data storage customers led to lower organic sales for the Nano Surfaces Division. However, AXS Division sales grew in the mid-single digits organically, led by XRF demand and timing of orders.

BSI adjusted operating profit jumped 56.8% to $49.7 million despite a negative $5 million effect from currency. The significant improvement was largely attributed to strong profitability within the BioSpin Group due to timing of orders, product mix and restructuring activity.

Geographically, sales in Europe and Asia were strongest. Chinese sales improved, with strength within Daltonics, but declines in other businesses. North American sales also advanced, while Japanese sales and orders both contracted. The company maintained its 2015 organic revenue growth forecast of 1% but raised its adjusted operating margin by 50 basis points to roughly 12.0%.

Illumina Dims on Revenue Outlook

Despite missing company revenue expectations by 3%, Illumina’s third quarter sales grew 14.5%, 18% organically, to $550.3 million. Shipments to clinical and translational customers grew more than 40%. The reproductive health–related business and demand from commercial customers were also strong. The sales shortfall was attributed to lower-than-projected NextSeq shipments, and slower growth in Europe and Asia. Product sales grew 13.1%, 17% organically, to account for 86% of sales. Service and Other revenue climbed 23.2%, 27% organically, to make up 14%.

Illumina sequencing sales rose 21%, including consumables revenue growth of 36% to $270 million, or roughly 58% of sequencing sales. Consumables were driven by strong utilization rates especially for the HiSeq X, which accounted for roughly 70% of consumables shipments. Sequencing systems revenue fell slightly. Sales of high-end systems were flat, as lower HiSeq X placements were offset by robust sales of the HiSeq 3000 and especially the HiSeq 4000. Despite the decline in HiSeq X shipments, sales and orders were ahead of expectations due to new customers and demand in the Americas. Benchtop systems sales were below expectations, as NextSeq sales were roughly flat and MiSeq sales declined slightly, especially in Japan. Nearly half of NextSeq orders came from clinical and translational customers, including higher demand from NIPT partners in China. NIPT-related NextSeq orders grew 60%.

Sequencing services revenue was also strong, as NIPT service revenue rose roughly 20% and preimplantation genetic screening revenue grew more than 25%. Instrument maintenance contracts also contributed to service growth.

Microarray sales fell 17% to account for less than 15% of sales. Genotyping orders grew 26%, led by demand from direct-to-consumer and agricultural customers. The company projected a sharper 2015 decline in the array business, with sales falling in the low double digits and flat orders. For 2016, array sales are expected to rise modestly.

Including currency, Illumina shipments in the Americas and Europe grew 22% and 6%, respectively. Delayed instrument orders negatively impacted Europe. Asia Pacific sales were flat due to weakness in Japan. Adjusted gross margin was flat at 72.6% of sales. Adjusted operating profit expanded 13.6% to $165.7 million.

The firm lowered its 2015 sales growth guidance by 200 basis points to 18%, or 21% organically, including similar growth for the fourth quarter. However, it maintained its long-term growth outlook of 15%–20% through 2016.

Strong Pharma and Diagnostics Growth for PerkinElmer

PerkinElmer reported third quarter sales above company guidance, as adjusted sales rose 3.8% or 6% organically due to broad demand in the US, strong diagnostics sales in China and an extra week in the quarter, which contributed roughly 2% to organic growth. Organic sales in the Americas and Asia each grew in the mid-single digits. Sales in China advanced in the high single digits organically, while sales in Japan were weak. European sales grew in the high single digits organically.

PerkinElmer Human Health (HH) revenue grew 7% organically. Despite a strong year-over-year comparison, Diagnostics sales rose roughly 7% organically, led by double-digit growth in China, and demand for newborn and infectious disease screening. Medical Imaging sales were flat due to a strong comparison. Demand for informatics and OneSource services, as well as new products such as the Opera Phenix system drove the Life Science Solutions business’s 7% organic growth. The company highlighted demand from its top 20 pharmaceutical and biotechnology customers, which grew in the mid-teens to make up roughly 10% of sales. Academic and government markets continued to improve, with the exception of Japan, which recorded weak sales across all end-markets. HH adjusted operating profit rose 7.2% to $78.9 million due to product mix and cost control measures.

Environmental Health (EH) sales advanced 5% organically, led by demand from food and environmental customers. Industrial sales were stable due to increased demand for inorganic and materials characterization products, as well as contributions from Perten (see IBO 11/30/14). Sales for the laboratory services business grew roughly in the high single digits organically. In spite of increased R&D investments, EH adjusted operating profit expanded 5.4% to $26.9 million due to improved supply chain initiatives and controlled spending.

PerkinElmer adjusted gross profit margin was flat at 47.2%. Adjusted operating income grew 4.8% to $95.7 million. The company narrowed its full-year organic revenue guidance but maintained a midpoint growth of 4%, including roughly 1.5% growth from new products. Fourth quarter sales are expected to grow 3%-4% organically to $610–$620 million.

Biopharma Drives Thermo’s Growth

Third quarter sales for Thermo Fisher Scientific advanced 4.5% organically, led by robust demand from biotech customers, strong growth in China and favorable pricing. The company realized $25 million in revenue synergies in the quarter. Orders grew slightly less than revenue growth, but expanded organically in all four segments.

Pharmaceutical and biotech sales grew just above 10%. Sales in industrial and applied markets rose in the low single digits, as continued strength in applied markets was partially offset by weakness from core industrial customers. Diagnostics and health care, as well as academic and government markets each grew in the low single digits. Sales in China grew 15%. Other emerging markets were mixed, as India was strong but Russia was weak. Overall, Asia Pacific sales grew in the high single digits, including muted growth in Japan. Sales in North America and Europe each advanced in the mid-single digits. Rest of World sales declined in the mid-single digits.

Life Science Solutions (LSS) sales jumped 4.8% organically, led by demand for bioproduction and biosciences products. LSS adjusted operating income grew 8.6% to $332.7 million due to strong cost synergies and enhanced productivity. Analytical Technologies (AT) sales grew 4.7% organically, led by chromatography sales, demand from environmental and food safety markets, and strong service revenue. However, sales of chemical analysis products fell due to challenges in certain commodity materials markets. AT adjusted operating profit rose 6.3% to $137.8 million, as productivity improvements and product mix more than offset growth in investments and currency headwinds.

Thermo adjusted gross margin fell 80 basis points to 48.3% due to product mix and currency. Adjusted operating profit improved 2.0% to $933.7 million as a result of productivity improvements and cost synergies. Cost synergies were $32 million, in line with the 2015 target of $130 million. For 2015 and 2016, the company expects revenue synergies of $60 million and $150 million, respectively. Thermo raised the mid-point of its 2015 revenue outlook by $70 million to $16.81–$16.91 billion. Roughly $30 million of the revenue increase was attributed to the acquisition of Alfa Aesar (see IBO 6/30/15), the remaining increase was due to a modest shift in currency headwinds. The organic growth forecast of roughly 4% was unchanged.