Despite continuing weakness in many government and industrial markets, major US publicly held analytical instrument and lab product firms generated revenue growth in the calendar year third quarter, as demand from China and applied markets remained strong. In addition, select life science markets, such as those related to sequencing, were healthy. Businesses reported little overall impact on sales growth from the brief US government shutdown (see IBO 10/15/13). However, Bruker and PerkinElmer each reported that the closure delayed exports of inductive coupled plasma–MS systems.

For the seven businesses, excluding Bio-Rad Laboratories Life Science (LS), whose quarterly results are profiled on pages 9–11, total calendar year third quarter sales rose 4.2% on both a reported and organic basis (see table, page 9). The results for Agilent Technologies now consist of the new Life Sciences, Diagnostics and Applied Markets business (LDA), which replaces the Life Sciences (LS) and Chemical Analysis (CA) segments. Total sales for the seven companies would have grown 3.7% if Agilent CA and LS, rather than LDA, revenues were included. Illumina continued to lead the pack, recording its fifth consecutive quarter of revenue growth of more than 20%. In fact, all seven businesses recorded revenue growth.

Operating profits for the seven businesses rose 2.5%, led by double-digit growth for Agilent LDA and Illumina. If the operating profits for Agilent CA and LS, rather than for LDA, were included, total operating profits for the seven businesses would have increased roughly 1.2%. Thermo Fisher Scientific Analytical Technologies (AT) and Waters reported a decline in operating profit due to lower volume and currency effects. Bruker Scientific Instruments (BSI) operating profit declined in double digits.

Applied markets were a bright spot again this quarter, as reported by Life Technologies, Thermo AT and Waters. Pharmaceutical market demand was healthy for Agilent LDA, PerkinElmer and Thermo. Gains in these two markets largely offset slow US and European academic and government markets and worldwide industrial markets. Soft demand in industrial markets, especially metals, affected sales growth for BSI and Thermo AT. However, Agilent LDA and Waters each reported sales growth for the chemicals end-market. PerkinElmer Human Health and Thermo each reported declines in academic revenues.

Good demand for MS was reported by Agilent LDA, Thermo AT and Waters. Agilent LDA and Thermo AT also reported healthy LC sales, but Waters reported softer demand tied to the slower pharmaceutical R&D spending. Molecular spectroscopy sales were strong for Agilent LDA and Bruker CALID. Sequencing sample preparation consumables were a high point for Agilent LDA and Illumina. Other highlights included Bruker’s X-ray fluorescence business, PerkinElmer’s in vivo imaging instrument sales, and Waters’s TA Instruments business.

China fueled sales growth for Agilent LDA, PerkinElmer and Thermo. However, for Asia at large, Bruker, PerkinElmer and Thermo reported tempered growth due to slower industrial markets and currency effects. Waters benefited from Japanese stimulus spending, but Agilent LDA and PerkinElmer noted little effect. Agilent LDA, PerkinElmer and Thermo highlighted sales growth in Brazil. Illumina grew strongly in Europe, while Bio-Rad LS reported stabilization in the market.

In its third quarter conference call, Bruker announced an additional $5–$10 million of restructuring actions, bringing total cost savings to $15–$20 million, which are expected to be realized in 2014. Thermo realized $20 million this quarter of its planned $85 million in 2013 restructuring efforts.

The information below is compiled from company financial reports, conference calls and SEC filings.

Agilent Technologies Life Sciences, Diagnostics and Chemical Analysis

Based on the new reporting segment (see IBO 9/30/13), fiscal fourth quarter sales for Agilent Life Sciences, Diagnostics and Applied Markets (LDA) grew 7.7% organically to represent 59% of sales. Sales for all geographies grew, except Japan. European sales climbed 13% to account for 33% of LDA revenues. Sales to Asia Pacific and the Americas made up 32% and 35%, respectively. Sales to Brazil, Russia, India and China (BRIC) grew 5%, 22%, 9% and 40%, respectively. Fiscal 2013 LDA sales grew 11% organically to make up 57% of Agilent sales. Fiscal 2014 LDA sales are projected to grow 4.4% organically to $4.03–$4.13 billion. Fiscal first quarter 2014 sales are expected to grow 5.4% organically to between $990 million and $1.01 billion.

Agilent Life Sciences and Diagnostics (LSD) fiscal fourth quarter sales improved 8.8% organically, led by sales of consumables, LC, diagnostic products and services. Pharmaceutical and biotechnology sales grew 10% due to demand in emerging markets and LC upgrades, including close to double-digit growth for high-end LC. Orders for LC/MS also increased. Diagnostics and Clinical sales climbed 16%, led by double-digit growth for Dako’s companion diagnostics, reagent partnership and pathology businesses. Clinical sales grew 12%, led by microarrays and double-digit growth for Bioanalyzer and TapeStation products. Following weak sales a year ago, academic and government sales improved 4%. Sales to the Americas, Europe and Asia Pacific accounted for 38%, 35% and 27% of LSD sales, respectively. Gross profit margin slipped 60 basis points to 55.1% of sales. Adjusted LSD operating margin expanded 180 basis points to 19.2% of sales due to cost savings measures.

Agilent Chemical Analysis (CA) sales grew 6.1% organically for the quarter, led by demand for spectroscopy, consumables and services. Chemical and energy, and food markets grew 5% and 7%, respectively, driven by sales to BRIC regions. Environmental and forensics sales were flat, as higher demand for forensics products was offset by lower government spending for environmental products in the US and Europe. Sales to Asia Pacific, the Americas and Europe accounted for 40%, 31% and 29% of CA sales, respectively. Gross profit was flat at 52.9% of sales. Adjusted CA operating margin improved 10 basis points to 24.7% of sales.

Bio-Rad Laboratories Life Science

Third quarter revenue for Bio-Rad Laboratories Life Science (LS) declined 2.5%, 4.4% organically, to account for 32% of revenues (see page 12). The acquisition of AbD Serotec (see IBO 12/31/12) contributed 3.3% to revenue growth, while currency reduced sales growth by 1.3%. Organic revenue were negatively impacted by lower lab separation and gene expression sales to academic and government markets, especially in the US, Europe and Japan. Chinese sales were also disrupted by changes to LS’s distribution network, as it shifted to smaller distributors. Organic sales to nearly all geographic regions were either flat or declined, with the sharpest drop in Asia. However, this decline was partially offset by demand for cell sorting and LC systems.

Bruker Scientific Instruments

Third quarter sales for Bruker Scientific Instruments (BSI) grew only 0.3% organically due to weak industrial markets in Asia Pacific and slower academic funding. System revenue slipped 1.7% to make up 80% of BSI sales. Aftermarket revenue grew 10.0%. Adjusted BSI gross margin fell 80 basis points to 47.3% as a result of lower volume, pricing and currency. BSI adjusted operating margin contracted 225 basis points to 11.6% of sales.

Bruker CALID sales grew in double digits, including growth for all divisions. Optics generated double-digit growth. Life Science and Clinical sales recorded modest growth. Detection sales also contributed to segment growth and are up in the high single digits year to date. Chemical & Applied Markets (CAM) sales grew in double digits and operating loss narrowed. BioSpin revenue contracted in the mid-single digits, including a double-digit decline in Preclinical Imaging sales due to lower MRI and molecular imaging sales. However, the micro-CT business performed well, and while NMR sales were flat, orders were strong. BioSpin orders are up in high single digits year to date. BMAT sales declined in the low single digits because of weak demand for atomic force microscopy from industrial markets and delayed orders for the Nano Surfaces division from microelectronics customers. Conversely, demand for X-ray fluorescence products, especially in China, led to modest growth for AXS. Given the weak performance and expected fourth quarter double-digit decline for BMAT sales, Bruker initiated a new restructuring effort to cut 150 employees across all three BSI divisions. Bruker lowered its full-year organic sales forecast from 3% to 0%–1% to $1.78–$1.80 billion.

Illumina

Illumina third quarter sales climbed 20% organically, led by sales of sequencing consumables and HiSeq systems. Sequencing sales jumped 37%, including 26% growth for instruments. The company shipped more than 100 HiSeq units, of which 80% were the 2500. Roughly 40% of HiSeq shipments were to new customers, including half of those to customers outside the US. MiSeq sales and orders also increased. Sequencing consumables revenue climbed 38% due to higher utilization rates and 25% growth for sample preparations products, primarily for Nextera. Demand for new MiSeq reagent kits also contributed to sales growth, accounting for 20% of MiSeq reagent revenue. Growth for sequencing service revenue was driven by acquisitions and the completion of more than 3,000 human genomes, representing a 90% increase. The company received orders for more than 10,000 genomes during the quarter, which was accelerated by the partnership with the Global Genomics Group. Illumina’s microarray sales declined 3% due to lower consumables and instrument revenues. However, this was partially offset by strong demand for genotyping services. The company processed roughly 90,000 genotyping samples in the quarter.

Illumina’s sales to the Americas and Europe grew 25% and 27%, respectively. Asia-Pacific sales climbed 22%, with particular strength in Japan. Adjusted gross profit margin slipped 10 basis points to 69.7% of sales due to product mix and acquisitions. Adjusted operating margin fell 231 basis points to 24.7% of sales due to higher R&D, increased sales personnel and acquisitions. Illumina raised its 2013 revenue growth guidance from 20% to 22% including acquisitions.

Life Technologies

Third quarter sales for Life Technologies grew 2.4% organically due to strength in Research Consumables (RC) and Bioproduction sales within the Applied Sciences segment. RC sales were driven by demand for fluorescent imaging, stem cell, synthetic biology and cell culture products. Despite continued demand for Ion Torrent products, Genetic Analysis sales were offset by lower qPCR royalties and SOLiD revenue. Excluding currency, Life Technologies sales to Asia Pacific, Japan and Europe grew 18%, 8% and 2%, respectively. Sales to the Americas were flat. Adjusted operating margin advanced 14 basis points to 28.2%.

PerkinElmer

Adjusted and organic third quarter sales for PerkinElmer each grew 2%, led by high single-digit sales growth for pharmaceutical and biotech markets. All figures below are organic. Recurring revenue grew in the high single digits. Instrument and components revenue declined in the mid-single digits. Sales to the Americas improved in the mid-single digits, driven by US environmental and research markets and growth in Brazil. Asian sales grew in the low single digits, including double-digit growth in China. However, sales growth in Southeast Asia and India slowed, and sales to Japan grew 3%. Emerging markets accounted for roughly 28% of sales. Adjusted gross profit margin slipped 90 basis points to 47.4% of sales as a result of product mix, increased informatics investments and modest pricing pressure for environmental products in emerging markets. Adjusted operating margin advanced 33 basis points to 15.5% of sales due to restructuring and cost controls. The company maintained its low single-digit organic growth forecast for 2013. But it lowered its fourth quarter sales forecast by $10–$12 million to $582–$592 million due to government delays for export licenses and lower capital spending by customers in India and Southeast Asia because of currency devaluations.

Within Human Health (HH), Research sales were driven by informatics sales and mid-single digit sales growth for in vivo imaging, which was particularly strong in the US. However, academic sales declined in the mid-single digits. Diagnostics sales fell due to a strong year-over-year comparison for medical imaging. Excluding it, Diagnostics sales would have increased in the mid-single digits, led by more than 30% organic sales growth for newborn screening in Asia and strong infectious disease screening demand in China. Sales of clinical screening and infectious disease products grew in the mid-single digits. HH adjusted operating margin grew 80 basis points to 22.4% of sales due to product mix and lower expenses. Environmental Health (EH) sales were driven by demand for lab services and over 20% sales growth in China. EH adjusted operating margin fell 60 basis points to 10.5% of sales due to pricing pressure and product mix.

Thermo Fisher Scientific Analytical Technologies

Third quarter Thermo Fisher Scientific Analytical Technologies (AT) revenue grew 1.5% organically. MS sales, benefited from new systems and demand in China. Demand was also strong for HPLC and for BioProcess Production, for which sales grew in the mid- to high single digits. Instrument sales to applied markets were also higher. However, growth was mostly offset by continued weakness in the industrial markets, especially in the areas of commodities and materials. US academic and government sales also negatively impacted growth. Operating margin contracted 76 basis points to 18.1% of AT sales due to product mix, increased investments and currency.

Waters

Waters third quarter sales grew roughly 3% organically. All figures below exclude currency. Total instrument and recurring revenues grew 2% and 6% to account for 52% and 48% of sales, respectively. Sales to the US, Asia (excluding Japan) and Japan grew 6%, 6% and 5% to account for 31%, 25% and 9% of revenues, respectively. Chinese sales grew 7%, but were hindered by delayed import and tax paperwork. Sales to Europe declined 1% to represent 28%. Sales to Rest of World were flat to account for 7%. Adjusted gross profit margin declined 130 basis points to 58.1% of sales due to currency and product mix. Adjusted operating margin fell 177 basis points to 27.1% of sales as a result of lower margins and currency. Fourth quarter sales are projected to decline 4%, 2% excluding currency, with recurring revenue growth in the mid- to high single digits and lower LC sales.

Excluding currency, Waters Division sales grew 2%. MS sales were led by demand for Q-Tof systems and for tandem quadrupole systems for clinical and applied applications. Demand for high-end tandem MS systems used for early-stage drug development declined. LC sales improved sequentially, but remained challenged due to capital spending delays by large drug firms. US segment sales grew 3%, including growth in pharmaceutical and chemical markets, but a double-digit decline for government and academic sales. European sales grew in low single digits, including high single-digit growth for government and academia, but a modest decline for pharmaceutical sales. Japanese sales improved as a result of academic and government stimulus. Sales to India were slightly higher, and Chinese sales grew in the mid-single digits. TA sales climbed 15% excluding currency.