IBO Indexes Profit from Earnings

Positive corporate earnings and acquisitions boosted US equity markets in April, as the Dow Jones Industrial Average, S&P 500 and NASDAQ ended the month up 1.4%, 1.5% and 2.6%, respectively. Momentum was furthered by rising home sales, manufacturing data and consumer sentiment, along with optimistic comments from the Federal Reserve. However, investors grew apprehensive following renewed European debt concerns, a criminal investigation against Goldman Sachs and a lower-than-expected US GDP report. On April 30, the Commerce Department reported annualized first-quarter GDP growth of 3.2%, 20 basis points below analysts’ forecast, leading the Dow, NASDAQ and S&P 500 down 1.4%, 1.7% and 2.0%, respectively. Year to date, the Dow, S&P 500 and NASDAQ are up 5.6%, 6.4% and 8.5%, respectively.

All four IBO Stock Indexes finished the month in positive territory. The Diversified Instrumentation Index jumped 6.2%, while the Lab Consumables/Equipment, Laboratory Instrumentation and Process/Metrology/Motion Instrumentation Stock Indexes gained 3.3%, 1.8% and 0.9%, respectively.

Laboratory Instrumentation Stock Index

For April, the Laboratory Instrumentation Index improved 1.8% to close at 596.47. Sixteen companies traded higher, and seven companies declined. Symyx Technologies led the Index, climbing 21%, while Transgenomic fell 37%. Year to date, the Index has gained 5.4%, with 18 companies improving and five companies in negative territory. Cepheid has recorded the largest gain, up 60%, while Helicos Biosciences is down 30%.

The majority of companies in the Index reported better-than-expected earnings this month and raised full-year guidance. Cepheid reported a first-quarter loss of $0.07 a share on April 22, $0.03 narrower than analysts’ consensus. The company projected 2010 EPS ranging from a loss of $0.05 to a profit of $0.02 a share. Shares soared 13.1% the following day. Waters reported EPS of $0.81 on April 27 (see page 12), $0.03 ahead of expectations, and increased its full-year EPS range by 4% to $3.85–$4.00. Shares improved 0.4%. On April 28, Thermo Fisher Scientific, Illumina and Beckman Coulter all reported better-than-expected EPS. Thermo reported EPS of $0.84 (see page 12), $0.09 better than consensus, and raised its 2010 EPS forecast by 2% to $3.40–$3.50. Shares climbed 4.2%. Illumina recorded EPS of $0.21 (see page 12), $0.02 ahead of estimates, leading shares up 13.0% the following day. Beckman also beat earnings by $0.02 a share, reporting EPS of $0.86 (see page 12). The company projected 2010 EPS of $4.30–$4.50, sending shares up 8.1% the following day. On April 29, Bruker announced EPS of $0.10 (see page 12), $0.02 ahead of expectations, while Caliper Life Sciences reported a loss of $0.02, $0.05 narrower than estimates. Both companies traded marginally higher. On the same day, Becton Dickinson reported fiscal-year second-quarter EPS of $1.27, $0.04 better estimates, and confirmed its full-year EPS outlook of $5.05–$5.15. Shares were relatively unchanged. Also on April 29, Harvard Biosciences announced EPS of $0.07, compared to $0.06 a year ago, and projected 2010 EPS of $0.36–$0.38. Shares improved 2.1%.

Other companies in the Index reported less favorable results. On April 21, Affymetrix reported a first-quarter loss of $0.07 a share (see page 12), $0.02 narrower than expectations, but missed revenue guidance by roughly 3%, leading shares down 13.6% the following day. Symyx Technologies reported a loss of $0.05 a share on April 29, $0.04 wider than consensus, leading shares down 4.2% the following day.

In other news, on April 5, Accelrys and Symyx Technologies announced an all-stock merger agreement (see IBO 4/15/10), sending shares up 22.1% and 7.8%, respectively. However, the deal prompted several legal investigations against Symyx’s board of directors on behalf of shareholders for breach of fiduciary responsibility. On April 12, Bruker climbed 3.0% following positive comments in a Barron’s article, citing a potential 33% price increase to $18 a share.

On April 15, in an SEC filing, Helicos reported that it had received notification from the NASDAQ Stock Market for failure to satisfy a minimum $1.00 bid price requirement. Shares fell 8.9% the following day. In a late filing, on April 21, Helicos reported a fourth-quarter loss ended December 31 of $0.11 a share, compared to loss of $0.40 a share last year. Shares climbed 6.7%. On April 19, Sequenom launched its MassArray 4 genetic research system, leading shares up 4.3%. Thermo announced on April 20 that it would purchase $750 million of common shares and offer $750 million in senior notes to help reduce debt. Shares climbed 1.5%. On April 30, the Standard & Poor’s Ratings Services raised Bio-Rad Laboratories’ corporate credit to “BBB” from “BBB-” and raised its senior subordinated rating to “BBB-” from “BBB+.” Yet shares were unchanged.

On April 7, Wedbush initiated coverage of Sequenom with an “Underperform,” leading shares down 4.8%. Cepheid was rated “Outperform” by Wedbush on April 7, downgraded by Thomas Weisel on April 15 to “Market Weight” from “Overweight,” rated “Underperform” by RBC Capital Markets on April 21, and downgraded by Robert W. Baird on April 23 to “Outperform” from “Neutral.” On April 27, Ladenburg Thalmann initiated coverage of Sequenom with a “Neutral” rating. JMP Securities initiated coverage of Illumina on April 9 with a “Market Perform” rating. On April 21, RBC Capital Markets rated Beckman and Becton Dickinson “Underperform” and “Sector Perform,” respectively. Barclays Capital initiated coverage of Becton Dickinson on April 27 with an “Equal Weight” rating. Jefferies upgraded Thermo on April 26 to “Buy” from “Hold.”

Process/Metrology/Motion Instrumentation Stock Index

The Process/Metrology/Motion Instrumentation Stock Index gained 0.9% to 387.36. Five companies improved, led by Nanometrics, which rose 13%, while three companies traded lower. For the year, the Index is up 5.1%, with half the companies in positive territory and the other half losing ground. Zygo sustained the largest return, up 40%, while RAE Systems has fallen the most for both the month and year, down 3% and 28%, respectively.

Nanometrics amended a loan agreement on April 13 to increase its revolving credit facility from $15 million to $20 million and extended the maturity date. Shares gained 2.2% the following day. Veeco Instruments reported EPS of $0.49 a share on April 26, $0.02 better than consensus, and projected second-quarter EPS of $0.78–$0.90, well above analysts’ estimates of $0.59 a share. Yet shares traded only marginally higher the following day. On April 26, SDIX signed a distribution agreement with AES CHEMUNEX, expanding sales opportunities of food pathogen detection systems in Europe. Shares improved 2.1%. Janney Montgomery Scott upgraded MTS Systems on April 6 to “Buy” from “Neutral.”

Lab Consumables/Equipment Stock Index

The Laboratory Consumables/Equipment Stock Index grew 3.3% in April to 566.55, with half the companies up and the other half down. Sigma-Aldrich gained the most value, climbing 11%. Kewaunee Scientific lost the most value for both the month and year, falling 6% and 9%, respectively. Year to date, the Index is up 13.0%, with six companies trading higher and two companies with negative returns. Millipore has retained the largest price increase, rising 47%.

Sigma-Aldrich reported EPS of $0.84 on April 22, $0.05 ahead of consensus, and increased its 2010 outlook by $0.05 to $3.05–$3.20. Share jumped 3.7%. On April 27, Life Technologies reported EPS of $0.87 (see page 12), $0.07 better than consensus, and maintained its 2010 EPS of $3.30–$3.50, which was in line with expectations. Shares rose 5.0% the following day.

JMP Securities imitated coverage of Life Technologies on April 9 with a “Market Outperform” rating. UBS upgraded Sigma-Aldrich on April 14 to “Buy” from “Neutral,” and increased its price target to $68 per share from $57. On April 21, RBC Capital Markets initiated coverage of QIAGEN with an “Underperform” rating.

Diversified Instrumentation Stock Index

The Diversified Instrumentation Stock Index jumped 6.2% to 116.33, as all six companies improved. For the year, the Index is up 14.4%, with all companies up in double digits. Mettler-Toledo gained the most value for both the month and year, up 15% and 20%, respectively.

The Index benefited from strong earnings reports. On April 21, AMETEK preannounced better-than-expected earnings, raising its first-quarter EPS guidance by 16% to $0.53–$0.54 and its full-year EPS by 4% to $2.20–2.28. Shares climbed 3.0%. The company reported EPS of $0.54 on April 27, $0.02 ahead of expectations, and projected second-quarter EPS of $0.53–$0.55, in line with expectations. Yet, shares traded slightly lower. The following day, Robert W. Baird upgraded the company to “Outperform” from “Neutral.”

Danaher reported EPS of $0.96 on April 22, $0.08 better than consensus, and increased its full-year EPS by 8% to $4.25–$4.40. The company also projected second-quarter EPS of $1.00–$1.05, 4% ahead of analysts’ estimates, leading shares up 3.6%. On April 29, Roper Industries announced EPS of $0.65, in line with expectations, but increased its 2010 EPS outlook by 3% to $2.95–$3.10. Yet shares fell 4.5%.

Teledyne Technologies reported EPS of $0.68 on April 29, $0.07 better than estimates, and raised its full-year EPS by 3% to $2.89–$2.96. Shares rose 2.8%. On the same day, Mettler-Toledo reported EPS of $1.13, $0.09 ahead of consensus, and increased its 2010 outlook by 5% to $6.26–$6.36. Shares jumped 4.7% the following day.

International

In April, three Pacific Region companies traded higher, and two companies declined. Horiba reported the largest decline, falling 5%. Techcomp led all companies for both the month and year, up 18% and 117%, respectively. Year to date, all five companies have positive returns.

On April 26, Hitachi High-Technologies reported a full-year loss ended March 31 of ¥20.55 ($0.22) a share, compared to ¥51.44 ($0.52) a share in the previous year, and projected fiscal 2011 EPS of ¥77.07 ($0.82). The company also revised its full-year dividend payment to ¥15.00 ($0.16) a share from the previous forecast of ¥10.00 ($0.11) a share. Shares contracted 1.5%.

This month, four European companies improved, nine companies declined and Alpha MOS traded flat. Spectris led all foreign companies, gaining 9%, while Robotic Technology Systems fell 19%. For the year, 11 European companies have positive returns, two firms remain in negative territory and one company is unchanged. Biohit leads all companies, up 67%, but Tecan is down 8%.

On April 21, Sartorius reported first-quarter EPS of €0.41 ($0.55), compared to €0.14 ($0.19) a share a year ago, sending shares up 1.8%. For 2010, the company projected 5% revenue growth in local currency. Biotage reported first-quarter EPS of SEK 0.04 ($0.01) (see page 12) on April 29, compared to a loss of SEK 0.24 ($0.03) a share a year ago. Shares gained 1.4%.

Chart: IBO Instrument Industry Stock Index

Lab Instrument Stock Index S&P 500

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

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

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