For most of January, US stock traded higher on improved economic data and strong corporate earnings. According to the US Commerce Department, the economy grew by an annual rate of 3.2% for the fourth quarter and 2.9% for the year, driven by higher consumer spending and exports. Even the Federal Reserve provided a more optimistic tone, barring unemployment figures, and projected US economic growth of 3%–4% for 2011. Despite a sharp market decline on January 28 attributed to violent protests in Egypt, the Dow, S&P 500 and NASDAQ ended the month up 2.7%, 2.3% and 1.8%, respectively.

IBO Stock Indexes experienced varied returns to start the year. The Process/Metrology/Motion Instrumentation and Lab Consumables/Equipment Stock Indexes improved 2.2% and 0.5%, respectively. The Diversified Instrumentation and Laboratory Instrumentation Stock Indexes declined 0.2% and 0.5%, respectively.

Laboratory Instrumentation Stock Index

This month, sample preparation company Pressure BioSciences was added to the Laboratory Instrumentation Stock Index. For January, the Index declined 0.5% to close at 657.02, with 12 companies in negative territory and 10 gaining ground. Sequenom recorded the largest decline, falling 15%, while Transgenomic jumped 29%.

Several companies in the Index announced preliminary fourth-quarter earnings reports this month. Illumina reported on January 11 preliminary fourth-quarter EPS growth of 35% to $0.28–$0.29, just below consensus. Year-end EPS is estimated to be $1.05–$1.06. Initial revenue growth exceeded estimates, climbing 44% for the quarter to $260 million and 35% for the year to $901 million. Shares declined 0.6%. On January 12, Affymetrix projected quarterly revenues of $85 million, a decline of 4.3%, but estimated positive GAAP operating income and net income. The company also projected a net cash balance of $140 million for the year end. Shares climbed 15.4%. On January 13, Caliper Life Sciences preannounced fourth-quarter revenue of $36.0 million, 7% higher than its projected upper guidance, and positive EPS for both the quarter and full-year. Year-end organic revenues were estimated to be $123.5 million for 10% growth. The company forecast 2011 revenues to increase 12%–20%. Shares soared 10.5%.

Waters officially reported earnings on January 25. The company announced EPS growth of 23% to $1.38 (see page 12), $0.07 better than expectations. The company projected 2011 EPS of $4.60–$4.70, yet shares slipped 0.4%. On January 31, Cepheid reported EPS of $0.02 (see page 12), compared with an expected loss of $0.02, and projected 2011 EPS of $0.30–$0.35.

In other news, Beckman Coulter fell 2.1% on January 7 after Reuters reported declining bidding interest from potential strategic bidders. On January 12, Bruker announced it had received orders for its new ultra-high field NMR valued at $7.5 million from the University of Minnesota, leading shares up 3.2%.

Several analysts’ opinions were lowered this month. On January 4, J.P. Morgan downgraded Affymetrix to “Underweight” from “Neutral,” sending shares down 7.7%. The company was also downgraded on January 13 by Barclays Capital to “Underweight” from “Equal Weight,” leading shares down 2.2%. On January 6, both Deutsche Bank and Auriga downgraded Waters from “Buy” to “Hold,” leading shares down 2.2%. RBC Capital Markets downgraded Illumina on January 14 from “Outperform” to “Sector Perform.” Contrasting opinions led Citigroup to upgrade Illumina on January 20 to “Buy” from “Hold” and increase its price target to $85 a share. Only one other company was upgraded this month. On January 10, UBS upgraded Bruker to “Buy” from “Neutral” and raised its price target to $21 a share. Shares jumped 6.3%.

Process/Metrology/Motion Instrumentation Stock Index

The Process/Metrology/Motion Instrumentation Stock Index rose 2.2% for the month to 460.09. Five companies increased in value. Two companies contracted, led by Zygo, which declined 11%. Nanometrics recorded the highest return, gaining 33%.

FEI announced on January 5 an order for three electron microscope systems from a federally funded research center in Canada. Shares rose 1.0%. Two days earlier, the company received an initial “Hold” rating by McAdams Wright Ragen. On January 12, SDIX reported that the FDA determined its RapidCheck Salmonella test to be equivalent in accuracy to current standard methods, sending shares up 41.4%. Nanometrics jumped 28.8% on January 14 due to a strong earnings report from Intel, one of its main customers, which also announced increased plant and equipment spending for 2011. RAE Systems climbed 3.0% on January 18 following an agreement to be acquired by Vector Capital for $1.75 per share (see page 2).

Lab Consumables/Equipment Stock Index

In January, the Laboratory Consumables/Equipment Stock Index increased 0.5% to 629.28, with four companies trading higher and three receding. Pall advanced the most, rising 12%, while Enzo Biochem fell 6%.

QIAGEN rose 1.4% on January 11 as the company acquired a minority stake in Alacris Theranostics and signed a strategic partnership with EyeSense. On January 31, the company reported EPS of $0.24 (see page 12), $0.01 below consensus, but projected 2011 EPS growth of 7%–13% to roughly $1.02. On January 11, Life Technologies announced a $500 million stock repurchase program, leading shares marginally higher.

Pall slipped 1.7% on January 20 as the company increased its dividend by nearly 10% to $0.18 a share. The company reported on January 28 that CEO and President Eric Krasnoff would retire by 2012. As a result, Credit Suisse upgraded Pall on January 31 to “Outperform” from “Buy” and raised its price target to $66, suggesting the company would be acquired prior to finding a new CEO. Shares jumped 6.8%.

Other analysts’ recommendations were less upbeat. Lazard Capital downgraded Techne on January 11 to “Hold” from “Buy.” The following day, KeyBanc Capital Markets downgraded Sigma-Aldrich to “Hold” from “Buy.” Meanwhile, on January 14, RBC Capital Markets downgraded Life Technologies to “Sector Perform” from “Outperform.”

Diversified Instrumentation Stock Index

Industrial conglomerate Illinois Tool Works, which owns lab product companies Instron, Buehler and Panreac, was added to the Diversified Instrumentation Stock Index. The Index slipped 0.2% to 133.76 this month. Five companies extended gains and two traded lower. Teledyne Technologies led the Index, climbing 8%, while Danaher declined 2%.

On January 27, AMETEK, Danaher and Teledyne Technologies all topped fourth-quarter earnings estimates. AMETEK reported EPS of $0.50 (see page 12), $0.03 ahead of expectations. The company projected first-quarter and full-year 2011 EPS of $0.46–$0.48 and $2.00–$2.07, respectively, in line with consensus. Danaher announced EPS of $0.67 (see page 12), $0.01 better than consensus, and projected first-quarter and full-year 2011 EPS of $0.46–$0.48 and $2.00–$2.07, respectively. AMETEK and Danaher declined 1.7% and 1.4%, respectively. Teledyne Technologies climbed 1.5% as the company reported EPS of $0.99 (see page 12), $0.19 better than estimates. On January 31, Roper Industries announced EPS of $1.10 (see page 12), $0.11 ahead of expectations, leading shares up 2.6%. The company forecast in line first-quarter and full-year EPS of $0.83–$0.87 and $3.82–$4.02, respectively.

Oppenheimer initiated coverage of Danaher on January 5 with an “Outperform” rating. On January 12, KeyBanc Capital Markets initiated coverage of Teledyne Technologies with a “Buy” rating.

International

In January, three Pacific Region companies traded higher, led by Hitachi High-Technologies, which gained 7%. Horiba declined 2%, and Techcomp was unchanged.

Hitachi High-Technologies reported on January 25 fiscal third-quarter EPS of ¥25.64 ($0.31) (see page 12), compared with a loss of ¥2.16 ($0.02) per share a year ago. The company also increased its projected fiscal full-year EPS by 1% to ¥125.05 ($1.47), leading shares up 2.1%. On January 26, Horiba increased its projected 2010 net income by 12.2% to ¥2,300 ($26.2 million), leading shares up 2.0% the following day.

UK-based Halma, whose subsidiaries include spectroscopy, water-testing and instrument-component suppliers, was added to the list of European companies to begin the year. For the month, nine European companies recorded positive returns, four contracted and one traded flat. Renishaw sustained the largest price increase, rising 33%, while Oxford Instruments lost 7% of its value.

A number of European companies experienced a sharp recovery in the second half of 2010. On January 12, Alpha MOS reported 29% revenue growth for the six months ending September 30, 2010, and net income of €0.3 million ($0.3 million), compared with a loss of €0.7 million ($1.0 million) a year ago. Shares soared 23.7% the following day. On January 26, Renishaw reported a 400% increase in EPS for the six months ending December 31, 2010, to £0.39 ($0.61) due to its Metrology segment. Shares jumped 19.7%.

On January 14, Spectris projected fiscal full-year adjusted operating profit growth of 77% to £140 million ($215 million), sending shares up 7.0%. Oxford Instruments stated on January 15 that fiscal fourth-quarter revenues and profits were in line with company expectations and well ahead of the same period a year ago. Nonetheless, shares fell 5.0% as the UK market declined.

Scientific Digital Imaging was the lone European company to report inconsistent demand. On January 17, the company reported a fiscal half-year EPS loss of £0.01 ($0.02), compared with a gain of £0.01 ($0.01) due to increased administrative expenses and a shift in product mix. Shares declined 3.1%.

Line Graph: IBO Instrument Industry Stock Index

          Lab Instrument Stock Index         S&P 500
 Jan-09   397.41                             198.01
 Feb-09   376.99                             176.24
 Mar-09   393.81                             191.29
 Apr-09   428.75                             209.26
 May-09   446.23                             220.37
 Jun-09   479.85                             220.41
 Jul-09   522.15                             236.75
 Aug-09   528.47                             244.70
 Sep-09   543.19                             253.44
 Oct-09   535.42                             248.43
 Nov-09   548.41                             262.68
 Dec-09   565.94                             267.35
 Jan-10   546.93                             257.47
 Feb-10   566.22                             264.81
 Mar-10   585.87                             280.38
 Apr-10   596.47                             284.51
 May-10   557.61                             261.19
 Jun-10   531.11                             247.12
 Jul-10   513.20                             264.12
 Aug-10   499.94                             251.58
 Sep-10   556.95                             273.61
 Oct-10   579.40                             283.69
 Nov-10   589.00                             283.04
 Dec-10   660.07                             301.53
 Jan-11   657.02                             308.36