Extreme market fluctuations once again reigned as investors questioned the sustainability of the US economic recovery. Worse than expected manufacturing and unemployment data were reported, but on October 14, the Dow surpassed the 10,000 level for the first time in over a year. On October 29, the Commerce Department announced that the US grew at an annual rate of 3.5% in the third quarter, beating estimates of 3.2%. For October, the S&P 500 and NASDAQ fell 2.0% and 3.6%, respectively, while the Dow was unchanged. Year to date, the Dow has gained 10.7%, the S&P 500 has improved 14.7% and NASDAQ is up 29.7%

All four IBO Stock Indexes traded lower. The Process/Metrology/Motion Instrumentation Stock Index suffered the largest decline, falling 4.6%, while the Lab Consumables/Equipment, Diversified Instrumentation and Laboratory Instrumentation Stock Indexes declined 2.2% 1.9% and 1.4%, respectively.

Laboratory Instrumentation Stock Index

For October, the Laboratory Instrumentation Index declined 1.4% to close at 535.42. Sixteen companies traded lower, while six companies improved. Helicos Biosciences experienced the largest decline, falling 34%, and Dionex climbed 4%. Year to date, the Index has gained 37.2%, with 17 companies in positive territory and five down. Helicos continues to lead the Index, gaining 385%. Sequenom has lost 88%.

Third-quarter earnings began with disappointing results from Affymetrix. On October 21, it reported a loss of $0.12 a share (see page 12), $0.03 below expectations, and announced revenue guidance slightly below census. The following day, shares fell 18.1%. On October 27, Illumina missed earnings expectations by $0.03 despite EPS growth of 31% to $0.17 a share (see page 12). It lowered its full-year pro forma EPS by over 10% to $1.05–$1.06, leading shares down 19.9% the following day.

Most companies in the Index beat expectations. Thermo Fisher Scientific on October 22 reported EPS grew 4% to $0.78 a share (see page 12), $0.02 ahead of expectations, and narrowed its full-year EPS to $2.95–$3.05 from $2.85–$3.10. Shares climbed 1.3%. On October 27, Waters announced EPS growth of 3% to $0.81 (see page 12), $0.04 ahead of expectations, leading shares up 1.5%. Symyx Technologies reported on October 28 EPS of $0.05 (see page 12), compared to a loss of $0.05 a year ago, and raised the lower range of its full-year EPS estimate by $0.04 to $0.12–$0.16. Shares improved 1.6% the following day. Also on October 28, Cepheid reported a loss of $0.07 a share (see page 12), $0.05 better than anticipated, leading shares up 6.0% the following day. On October 29, Bruker reported EPS of $0.10, $0.03 better than consensus, sending shares up 15.0%. After the close on October 29, Beckman Coulter reported EPS grew 9% to $0.85, $0.02 ahead of expectations, and increased its full-year outlook by roughly 2% to $3.85–$3.95 a share. However, on a reported basis, net earnings declined due to higher acquisition expenses, leading shares down 4.1% the following day. Also on October 29, PerkinElmer reported EPS of $0.30 (see page 12), $0.03 better than consensus, and raised its full-year EPS by 2.9% to $1.23–$1.26, yet shares declined 1.9% the following day. Dionex reported on October 29 fiscal first-quarter EPS of $0.57 (see page 12), $0.05 better than estimates, sending shares up 5.1% the following day.

On October 14, Needham upgraded Cepheid to “Buy” from “Hold,” with a $17 price target. On October 28, Leerink Swann upgraded Waters to “Outperform” from “Market Perform,” while Deutshe Securities upgraded it to “Buy” from “Hold.” On October 28, Robert W. Baird downgraded Illumina to “Neutral” from “Outperform,” while Caris & Company upgraded shares to “Above Average” from “Average.” On October 30, Wedbush Morgan upgraded Dionex to “Outperform” from “Neutral.”

Process/Metrology/Motion Instrumentation Stock Index

This month, the Process/Metrology/Motion Instrumentation Stock Index fell 4.3% to 314.18, with five companies declining and three companies gaining. RAE Systems recorded the sharpest decline, losing 29% of its value, while Nanometrics improved 25%. Year to date, the Index is up 29.9%, as five companies are in positive territory, two companies are down and Zygo has traded flat. Nanometrics shows the largest increase, rising 619%, while ICx Technologies is down 36%.

On October 26, Veeco Instruments announced EPS of $0.16 (see page 12), compared to analysts’ forecasts of flat earnings. It also raised its revenue guidance by 13% to $353–$363 million and projected a fourth-quarter EPS range of $0.29–$0.35. Shares jumped 5.1% the following day. Concurrently, Veeco announced a public offering of five million common shares, which were priced two days later at $23.75, causing shares to decline 8.1%. Nanometrics reported on October 29 EPS of $0.14 (see page 12), easily beating analysts’ expectations of a loss of $0.06 a share. Shares soared 13.7% the following day. The same day, Zygo reported a fiscal first-quarter loss of $0.23 a share (see page 12), $0.04 narrower than expected, yet shares slipped 5.2% the following day. Also on October 29, Strategic Diagnostics reported a loss of $0.01 a share, compared to a loss of $0.11 a year ago. Share improved 1.8%. On October 27, Stifel Nicolaus downgraded Veeco to “Hold” from “Buy” citing valuation reasons.

Lab Consumables/Equipment Stock Index

The Laboratory Consumables/Equipment Stock Index slipped 2.2% to 470.22 in October. Seven companies traded lower and Life Technologies rose 1%. Enzo Biochem sustained the biggest loss, falling 22%. For the year, the Index has gained 29.1%, with seven companies trading higher, led by Life Technologies, up 102%, while Techne is down 3%.

On October 14, Enzo reported a fourth-quarter loss of $0.14, compared to a $0.09 loss a year ago. Shares declined 4.3% the following day. Sigma-Aldrich announced on October 22 EPS of $0.70 (see page 12), $0.03 better than consensus, and reaffirmed 2009 EPS guidance of $2.70, yet shares traded marginally lower. On October 27, Life Technologies reported EPS $0.73 (see page 12), $0.11 better than anticipated, and raised its full-year EPS guidance by 6% to $2.90–$2.95, leading shares up 2.2%. On October 28, Techne reported fiscal first-quarter EPS of $0.72, $0.02 above consensus, yet shares slipped 0.9%. On October 7, Barclays Capital initiated coverage of QIAGEN with an “Overweight” rating.

Diversified Instrumentation Stock Index

The Diversified Instrumentation Stock Index declined 1.9% for the month to 89.73. Four companies declined, while Mettler-Toledo and Danaher rose 8% and 1%, respectively. For the year, five companies are trading higher. Teledyne Technologies has lost 23%. Agilent Technologies leads the Index, having gained 58%.

On October 22, Danaher reported EPS of $0.89, $0.03 ahead of expectations, leading shares up 0.8%. On the same day, Teledyne announced EPS of $0.72, $0.22 ahead of consensus, and raised its 2009 EPS by an average of 8% to $2.94–$2.98 a share. Shares improved 2.8%. On October 26, Roper Industries announced EPS of $0.63, $0.01 below expectations, and lowered its full-year EPS outlook by 2% to $2.57–$2.63. Shares traded marginally lower. On October 27, AMETEK reported EPS of $0.42, $0.02 ahead of expectations. It narrowed its full-year EPS to $1.89–$1.94 from $1.87–$2.02 a share and anticipated fourth-quarter EPS of $0.44–$0.49. Shares were relatively unchanged. Mettler-Toledo announced on October 29 EPS of $1.36 (see page 12), $0.18 better than expectations, and raised it full-year EPS guidance by roughly 5% to $5.39–$5.50. Fourth-quarter EPS are expected to be $1.90–$2.00. Shares climbed 4.2% the following day.

International

In October, all five Pacific Region firms declined. For the year, all are up, led by Horiba, which has gained 79%.

This month, eight European companies declined, six improved and Alpha MOS traded flat. For the year, 12 companies are positive and three are down. Sartorius reported on October 22 EPS of €0.07 ($0.01) (see page 12), compared with €0.16 ($0.24) a year ago, yet shares climbed 4.5%. On October 27, Biotage reported EPS of SEK 0.01 ($0.00), compared to SEK 0.14 ($0.02), leading shares down 6.6%.

Chart: IBO Instrument Industry Stock Index

Lab Instrument Stock Index S&P 500

Oct-07 678.52 371.47

Nov-07 654.48 355.11

Dec-07 656.46 352.05

Jan-08 583.13 330.52

Feb-08 607.77 319.03

Mar-08 600.29 317.13

Apr-08 600.29 332.20

May-08 622.99 335.75

Jun-08 602.24 306.89

Jul-08 639.07 303.86

Aug-08 643.46 307.57

Sep-08 590.45 279.64

Oct-08 456.82 232.26

Nov-08 416.63 214.88

Dec-08 390.29 216.56

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