Despite market volatility caused by upheaval in the Middle East, soaring crude oil prices and disappointing GDP estimates, in February, the Dow Jones Industrial Average and S&P 500 climbed 2.8% each, and the NASDAQ improved 3.0%. On February 25, the fourth-quarter GDP growth estimate was revised down to 2.8% from 3.2%, well below analysts’ forecast of 3.4%. Positive economic data included a jump in durable goods orders, growing consumer confidence, lower initial jobless claims and strong corporate earnings. For the year, the Dow, S&P 500 and NASDAQ have gained 5.6%, 5.2% and 4.9%, respectively.

Accompanied by strong earnings reports from a number of companies in the IBO Stock Indexes, on February 9, Moody’s Investor Services offered some constructive analysis on the life science industry. The credit ratings firm projected 5%–7% revenue growth for the industry over the next several years and alluded to possible acquisition activity within the sector. The Process/Metrology/Motion Instrumentation Index vastly outperformed all other Indexes in February, advancing 18.2%. The Diversified Instrumentation, Lab Consumables/Equipment and Laboratory Instrumentation Stock Indexes grew 5.4%, 0.7% and 0.6%, respectively.

Laboratory Instrumentation Stock Index

Fluidigm was added to the Laboratory Instrumentation Index following its IPO on February 9 (see IBO 2/15/11). The Index improved 0.6% for the month to close at 661.01, with 16 companies trading higher and seven losing ground. Beckman Coulter led the Index, climbing 15%. For the year, the Index has gained only 0.1%, despite 17 firms in positive territory. Helicos BioSciences has the largest return for the year, up 33%. Sequenom has shed the most value for the month and year, falling 10% and 24%, respectively.

Many Index companies beat quarterly earnings estimates this month (see table, page 6). Reporting results on February 2, Affymetrix beat consensus due to lower operating expenses, leading shares up 2.8%. Thermo Fisher Scientific reported results the same day (see page 12), projecting 2011 EPS to grow 12%–15% to $4.00–$4.10. Shares fell 2.4%. On February 3, PerkinElmer posted better-than-expected EPS, sending shares up 2.6% the following day. The company forecast 2011 EPS to grow 11% to $1.56–$1.64, matching estimates. On February 7, Luminex announced quarterly earnings, leading shares up 8.5% the following day. On February 24, Bio-Rad Laboratories bettered fourth-quarter EPS expectations (see page 12), leading shares up 3.5% the next day.

Among the companies meeting quarterly EPS expectations was Illumina. On February 8, it projected 2011 EPS to grow more than 30% to a minimum of $1.38. Shares slipped 1.2% the following day due to profit taking. On February 23, Bruker reported EPS in line with expectations (see page 12), yet shares slipped 0.8%. For 2011, Bruker’s EPS are anticipated to grow 27% to $0.90–$0.93. Pacific Biosciences reported an EPS loss for the quarter on February 15. Shares fell 5.4% the following day.

Other companies fell short of expectations. On February 7, Becton Dickinson fell short of fiscal first-quarter EPS and revenue expectations, leading shares down 5.4% the following day. The company projected fiscal full-year EPS of $5.45–$5.55 from continuing operations. Soon-to-be-acquired Beckman Coulter and Dionex both missed EPS consensus. Beckman jumped 10.0% on February 7, as Danaher agreed to pay $83.50 per share for the company (see IBO 2/15/11).

In other news, Fluidigm shares rose 3.9% in their debut. On February 10, Sequenom announced the publication of its clinical validation study for its fetal trisomy 21 test, leading shares up 7.2%. On February 14, Thermo sold $2.2 billion in senior notes to fund its purchase of Dionex (see IBO 12/15/11). On the same day, S&P lifted its corporate credit and senior unsecured ratings for Thermo to “A” from “A-,” while Moody’s also raised its senior unsecured ratings to “A3” from “Baa1.” Shares improved 1.5%. On February 18, MOCON announced a 5% dividend increase to $0.10 per share. Shares declined 1.6%. On the same day, Waters announced a $500 million stock repurchase program, lifting shares 3.6%. PerkinElmer jumped 7.3% on February 24, following speculation that it was for sale (see page 7).

Wedbush initiated coverage of Caliper on February 1 with an “Outperform” rating and a $9.00 price target. Shares climbed 2.0%. On February 9, Auriga USA downgraded Illumina to “Hold” from “Buy.” Rodman & Renshaw upgraded Sequenom on February 11 to “Market perform” from “Underperform.”

Process/Metrology/Motion Instrumentation Stock Index

The Process/Metrology/Motion Instrumentation Stock Index soared 18.2% to 543.78 in February and is up 20.8% for the year. For both periods, all seven companies are higher. Zygo recorded the largest gain for the month, climbing 33%. Nanometrics is up 40% for the year.

MTS Systems and FEI reported results on February 3. FEI shares rose 15.9% the following day. The company projected first-quarter EPS to grow 155% to $0.43–$0.49, 31% above expectations. MTS bettered quarterly EPS estimates by 88% due to higher gross margins. On February 7, Zygo and Veeco Instruments reported earnings, and shares rose 13.5% and 5.6%, respectively. Veeco projected lower-than-expected first-quarter EPS but anticipates more than $1 billion in sales for 2011 and EPS greater than $5.00, slightly above consensus. After missing EPS estimates, Nanometrics shares fell 4.3% on February 10. Full-year EPS is expected to grow 179% to $2.43.

McAdams Wright Ragen upgraded FEI on February 4 to “Hold” from “Buy” and raised its price target to $36 a share. Veeco was downgraded by Noble Financial on February 8 from “Buy” to “Hold” and by Credit Agricole on February 14 from “Outperform” to “Underperform.”

Lab Consumables/Equipment Stock Index

The Laboratory Consumables/Equipment Stock Index grew 0.7% this month to 633.78 and is up 1.2% for the year. For both periods, three companies traded higher, and four contracted. QIAGEN led the Index this month, up 12%. Pall has gained 10% for the year. Enzo Biochem has fallen 13% and 18% for the month and year, respectively. On February 3, Life Technologies beat EPS estimates and projected 2011 EPS of 3.80–$3.95, in line with expectations. Shares fell 4.2% the next day. On February 9, Fitch raised its issuer debt rating on the company to “BBB” from “BBB-.” Sigma-Aldrich exceeded quarterly EPS forecasts on February 9, but projected 2011 EPS of $3.45–$3.60, near the low end of expectations. The following day, Longbow downgraded the company to “Neutral” from “Buy,” leading shares down 5.9%.

Diversified Instrumentation Stock Index

The Diversified Instrumentation Stock Index rose 5.4% to 141.00 for the month and 5.2% for the year, with all seven companies improving. Mettler-Toledo boasted the highest return for the month, climbing 15%. Teledyne Technologies is up 19% for the year. Mettler-Toledo reported fourth-quarter results on February 10, lifting shares 4.9% the next day. The company increased its 2011 EPS guidance by 11% to $7.70–$7.80, for growth of 16%. Agilent Technologies beat fiscal first-quarter EPS estimates on February 14, but missed on revenues. The following day, shares fell 4.8%. The company raised its EPS outlook by 8% to $2.53–$2.63. Stifel Nicolaus upgraded Danaher on February 8 to “Buy” from “Hold” with a price target of $64 per share. Shares rose 1.5%. On February 11, Robert W. Baird downgraded Mettler-Toledo to “Neutral” from “Outperform.”

International

For the month, three Pacific Region firms improved, and two fell. Horiba was up 13%. Year to date, Shimadzu has fallen 15%. On February 15, Horiba reported fourth-quarter EPS growth of 56% to ¥68.9 ($0.85) and projected 2011 EPS to grow 1% to ¥189.17 ($2.30). Shares rose 2.2% the next day.

In February, five European companies recorded positive returns, seven declined and one was unchanged. For the year, eight are up, four are down and one is unchanged. For the month and year, Cybio has climbed 30% and 49%, respectively, while Oxford Instruments has lost 6% and 12%, respectively. On February 10, Analytik Jena reported fiscal first-quarter EPS grew 5% to €0.22 ($0.29). On the same day, Biotage reported that quarterly EPS declined 22% to SEK 0.25 ($0.04). On February 25, Spectris reported full-year organic revenue growth of 12% and nearly doubled EPS to £0.87 ($1.34). Shares jumped 12%.

 Line Graph: IBO Instrument Industry Stock Index

          Lab Instrument Stock Index         S&P 500

 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

 Feb-11              661.01                  317.14

 Cos.      Date Rept.     2010 4Q Adj. EPS      Consensus      Vs. Est.     EPS Growth    2009 4Q Adj. EPS

 Laboratory Instrumentation Index

 AFFX       2-Feb           $0.06                 $0.02         $0.04          N/A             ($0.11)

 BDX        7-Feb           $1.28                 $1.29        -$0.01          -2%              $1.30 

 BEC       23-Feb           $1.16                 $1.22        -$0.06         -10%              $1.29 

 BIO       24-Feb           $2.17                 $1.35         $0.82          61%              $1.35 

 BRKR      23-Feb           $0.27                 $0.27         $0.00           4%              $0.26 

 CALP      23-Feb           $0.02                 $0.01         $0.01         -60%              $0.05 

 CPHD      24-Feb           $0.02                -$0.02         $0.04          N/A             ($0.07)

 DNEX      7 -Feb           $1.04                 $1.08        -$0.04          13%              $0.92 

 HBIO      25-Feb           $0.11                   N/A           N/A          10%              $0.10 

 ILMN       9-Feb           $0.29                 $0.29         $0.00          38%              $0.21 

 LMNX       7-Feb           $0.07                 $0.05         $0.02         -42%              $0.12 

 PACB      15-Feb          -$0.97                   N/A           N/A          N/A                N/A

 PKI        3-Feb           $0.44                 $0.42         $0.02           2%              $0.43 

 TMO        2-Feb           $1.00                 $0.95         $0.05          10%              $0.91 

 WAT       25-Feb           $1.38                 $1.31         $0.07          23%              $1.12

 Cos.      Date Rept.     2010 4Q Adj. EPS      Consensus      Vs. Est.     EPS Growth    2009 4Q Adj. EPS

 Process/Metrology/Motion Instrumentation Index 

 FEI        3-Feb           $0.53                 $0.39         $0.14         179%              $0.19 

 MTSC       3-Feb           $0.86                 $0.46         $0.40         274%              $0.23 

 NANO      10-Feb           $0.34                 $0.47        -$0.13         325%              $0.08 

 VECO       7-Feb           $1.62                 $1.60         $0.02         295%              $0.41 

 ZIGO       7-Feb           $0.26                 $0.10         $0.16          N/A             ($0.33)

 Cos.      Date Rept.     2010 4Q Adj. EPS      Consensus      Vs. Est.     EPS Growth    2009 4Q Adj. EPS

 Lab Consumables/Equipment Index  

 LIFE      3-Feb            $0.90                 $0.87         $0.03          13%              $0.80 

 SIAL      9-Feb            $0.83                 $0.80         $0.03          11%              $0.75 

 TECH      1-Feb            $0.69                 $0.68         $0.01           0%              $0.69

 Cos.      Date Rept.     2010 4Q Adj. EPS      Consensus      Vs. Est.     EPS Growth    2009 4Q Adj. EPS

 Diversified Instrumentation Index   

 A        14-Feb           $0.60                  $0.57         $0.03          58%              $0.38 

 MTD      10-Feb           $2.56                  $2.30         $0.26          22%              $2.09