US equity markets advanced in May in spite of the US Federal Reserve’s implications to raise interest rates in June. On the economic front, first quarter US GDP growth projections were raised 30 basis points to 0.8%, led by continued strength in consumer spending and a strong housing market. However, the tepid economic growth was further hampered by lower fixed investments from the business sector, especially the energy markets. This weakness was also reflected in a sharp decline for core capital goods orders for April. The Dow Jones Industrial Average edged higher by 0.1% in May, while the S&P 500 and NASDAQ advanced 1.5% and 3.6%, respectively. Year to date, the Dow and S&P 500 are up 2.1% and 2.6%, respectively. The NASDAQ is down 1.2%.

Laboratory Instruments and Products

Affymetrix was removed from the Index following the completed acquisition by Thermo Fisher Scientific on March 31 (see IBO 3/31/16). This month, the Index advanced 5.6% in May to 250.27 and is up 2.2% for the year. Fifteen of the 21 companies were in positive territory, led by Enzo Biochem, which jumped 23.5%. The company settled a $35 million patent infringement case against Life Technologies (see page 2).

Both FEI and Harvard Bioscience recorded price increases north of 20% for the month, as shares climbed 20.7% and 22.9%, respectively. FEI vaulted 14.3% on May 27 following the proposed acquisition by Thermo Scientific for $107.50 per share (see page 2). FEI met first quarter adjusted EPS expectations on May 4 and reported record orders. The company maintained its full-year GAAP EPS outlook of $3.55–$3.70. On May 4, Harvard Bioscience announced that it regained listing compliance with the NASDAQ after missing its annual 2015 Form 10-K filing deadline. On May 12, the company reported better-than-expected first quarter adjusted EPS due to improved organic revenue growth and consolidation of facilities. The company maintained its 2016 adjusted EPS guidance of $0.08–$0.10.

Four companies also experienced strong price momentum due to upbeat quarterly results. Bio-Techne, which jumped 17.9% for the month, easily topped fiscal third quarter adjusted EPS forecasts on May 3, led by strong organic growth in the Protein Platforms segment and improved operational leverage. Agilent reported fiscal second quarter adjusted EPS ahead of its forecast on May 16, as a result of improved order execution in China, timing of shipments and reduced currency headwinds. The company raised its fiscal 2016 adjusted EPS guidance from $1.81–$1.87 to $1.88–$1.92, and projected third quarter adjusted EPS of $0.45–$0.47. Shares climbed 12.1% for the month. PerkinElmer benefited from reduced currency headwinds, productivity improvements and pricing. The company reported on May 5 that adjusted first quarter EPS grew 12% to $0.56, and raised its 2016 adjusted EPS range by $0.10 to $2.75–$2.85. Second quarter adjusted EPS is expected to be $0.65–$0.66. Shares improved 8.6% for the month. VWR, which advanced 8.3% for the month, reported on May 5 that first quarter adjusted EPS grew 21% to $0.40. The company raised its full-year adjusted EPS outlook from $1.62–$1.70 to $1.68–$1.74.

A number of companies also reported quarterly adjusted EPS well above expectations. However, the stronger-than-expected results were mostly attributed to favorable timing of revenues, a shift in currency headwinds and operational improvements. Luminex recorded first quarter adjusted EPS growth of 42% to $0.27 on May 2, led by strong system and consumables sales, as well as improved gross margins. It raised the lower end of its 2016 revenue outlook by $2 million to $247–$255 million. Shares improved 2.4% for the month. BD sailed past fiscal second quarter adjusted EPS estimates on May 5 due to timing of revenues, increased costs synergies, delayed R&D spending and a lower tax rate. Given the softer currency headwinds, the company raised its fiscal 2016 adjusted EPS guidance by $0.13 to $8.50–$8.57. Shares improved 3.2% for the month. Bruker easily topped analysts’ first quarter adjusted EPS consensus on May 4, as earnings jumped 50% to $0.21. However, earnings benefited from a strong NMR backorder and early delivery of its first 1 GHz NMR system. The company maintained its 2016 adjusted EPS guidance of $0.97–$1.02. The following day, BTIG Research downgraded the company from “Buy” to “Neutral.” Shares fell 6.7% for the month. Mettler-Toledo beat first quarter adjusted EPS on May 5, and raised the midpoint of its 2016 adjusted EPS outlook by $0.10 to $14.25–$14.35. The increase was primarily driven by a shift in currency headwinds, partially offset by a higher share count and lower-than-projected margin expansion. Second quarter adjusted EPS is projected to be $3.09–$3.14. Shares improved 4.9%.

In contrast, several firms reported either mixed or disappointing quarterly results. Following last month’s preannounced revenue shortfall (see IBO 4/30/16), Illumina missed first quarter adjusted EPS expectations on May 3 due to increased operating expenses and lower HiSeq placements. The company lowered its projected 2016 adjusted EPS by $0.20 to $3.35–$3.45. Nevertheless, shares grew 7.3% for the month. Despite beating revenue expectations on May 5, Bio-Rad Laboratories missed first quarter adjusted EPS consensus because of lower margins and higher R&D expenses. Nevertheless, the company maintained its 2016 sales outlook as well as gross margin range of 55%. Shares grew 4.9% for the month. On May 5, Fluidigm reported a slightly wider-than-expected first quarter adjusted EPS loss due to lower instrument volume. The company maintained its 2016 revenue guidance of $124–$128 million and slightly lowered projected operating expenses. Shares traded slightly higher for the month, up 2.7%. NanoString Technologies missed first quarter adjusted EPS consensus on May 5 due to timing of instrument revenue. However, the company is expected to recapture these sales and maintained its 2016 projected GAAP EPS loss of $2.30–$2.45. Shares fell 14.7% for the month. MTS Systems slumped 16.5% on May 11 after the company significantly missed fiscal second quarter adjusted EPS expectations due to a shortage of direct manufacturing labor, timing of completed projects and higher expenses. While the company maintained its fiscal 2016 revenue guidance, it lowered its full-year adjusted EPS range from $3.03–$3.28 to $2.60–$3.00. Shares recorded the sharpest decline in the Index for the month, falling 15.0%.

Diversified Instrumentation

The Index improved 1.9% in May to 202.77, and is up 8.1% year to date. Most companies in the Index traded higher, led by Corning, which jumped 11.9%. Roper Technologies declined the most, sliding 2.8%.

Xylem and Teledyne both exceeded first quarter adjusted EPS expectations on May 3 and May 5 respectively. Xylem also surpassed revenue estimates due to timing of projects and strong demand from public utility customers in the US. The company raised its 2016 adjusted EPS range by $0.03 to $1.98–$2.08. Conversely, Teledyne missed quarterly revenue expectations because of continued weakness in the energy markets. The company maintained its 2016 GAAP EPS guidance of $5.05–$5.15 and projected second quarter GAAP EPS of $1.20–$1.26.

International

Asia Pacific equity markets were mixed in May. India’s Sensex 30 and Japan’s Nikkei 225 recorded the strongest gains, climbing 4.1% and 3.4%, respectively. Conversely, Malaysia’s KLCI and Singapore’s STI indexes fell 2.8% and 1.7%, respectively.

Prices for the Pacific Rim companies in the IBO Stock Table were mostly higher in May, led by HORIBA, which climbed 13.1%. On May 11, the company reported that first quarter EPS expanded 22% to ¥75.58 ($0.66). However, the company projected 2016 EPS to decline 16% to ¥256.57 ($2.35) due to a shift in currency.

JEOL, which advanced 11.7% for the month, reported on May 5 that EPS soared 128% to ¥42.32 ($0.35) for the fiscal year ending March 31. GL Sciences also reported strong fiscal 2016 earnings growth on May 11, as EPS climbed 22% to ¥75.42 ($0.63). Shares improved 1.8% for the month. On May 11, Shimadzu reported that net income for the fiscal fourth quarter climbed 8.5% to ¥8.6 billion ($74.8 million). The company projected fiscal 2017 net income to increase a modest 0.4% to ¥24.0 billion ($218 million). Shares slipped 0.2% for the month. Precision System Science (PSS) recorded the largest price decline among Pacific Rim companies, falling 16.9%. On May 13, the company reported an EPS loss of ¥8.55 ($0.07) for the fiscal third quarter, compared to a profit of ¥9.25 ($0.08) as sales slumped 30.3%. PSS cut its fiscal 2016 revenue forecast by 15% and widened its projected EPS loss by 41% to ¥30.19 ($0.27).

Most major European Indexes traded higher in May except for Italy’s FTSE MIB and the UK’s FTSE 100, which contracted 3.1% and 0.2%, respectively.

Prices for UK-based companies in the IBO Stock Table were mixed this month. Scientific Digital Imaging recorded the largest gain, climbing 10.0%, while Spectris fell 7.7%. On May 20, the company announced that sales for the first four months of the year grew 2%. However, excluding acquisitions and currency contributions of 2% and 4%, respectively, organic sales declined 4%. The company experienced weakness in North American and Europe.

Prices for other European companies in the Stock Table all traded high with the exception of Sartorius, which fell 8.9%. Four companies grew at or near double-digits rates this month, including Datacolor, which advanced 9.8%. It reported on May 6 that EPS jumped 73% to 15.99 for the six months ending March 31. Merck KGaA, which expanded 8.6% for the month, reported on May 19 that first quarter adjusted EPS climbed 38% to €1.54 ($1.20) as a result of the Sigma-Aldrich acquisition (see IBO 9/30/14) and strong organic Process Solutions sales. It projected 2016 adjusted EPS of €5.65–€ 6.00 ($6.28–$6.67). On May 25, Exiqon announced support for the QIAGEN takeover (see IBO 5/15/16) and stressed the need for financing and restructuring measures should the acquisition not be completed. On May 19, QIAGEN extended its tender offer period until June 2 as the acceptance rate of 81.37% was below the conditional 90% needed to close the transaction.