The Dow Jones Industrial Average, S&P 500 and NASDAQ fell 2.2%, 2.1% and 0.6% in July. Wall Street’s anxiety was elevated due to political gridlock over how to raise the debt ceiling and the possibilities of a US Treasury credit downgrade. Economic data did little to mitigate the downward pressure as durable goods orders and quarterly GDP growth were below expectations. Second-quarter US GDP growth was 1.3%, compared with analysts’ forecast of 1.9%. Even corporate earnings, which started off on a strong note in early July, showed signs of an economic slowdown, especially from industrial companies. For the year, the Dow, S&P 500 and NASDAQ are up 4.9%, 2.8% and 3.9%, respectively.

This month, all four IBO Stock Indexes significantly underperformed the major US equity indexes. The Process/Metrology/Motion Instrumentation, Lab Consumables/Equipment, Diversified Instrumentation and Laboratory Instrumentation Stock Indexes slumped 12.4%, 10.7%, 10.2% and 5.0%, respectively.

Laboratory Instrumentation Stock Index

In July, the Laboratory Instrumentation Index declined 5.0% to close at 676.63, with 15 companies in negative territory and six improving. Helicos BioSciences recorded the largest increase, climbing 111%, while Affymetrix slumped 29%. The Index has maintained a profit of 2.5% for the year. Fourteen companies have positive returns, and seven are trading lower. Transgenomic leads the Index, having gained 120%, while Pressure BioSciences has fallen 46%.

Initial earnings reports from Affymetrix and Waters spurred fears of weaker demand and a slower-than-expected second half of the year. Affymetrix lowered its second-quarter revenue guidance on July 6 to $64–$65 million, roughly $10 million below analysts’ expectations (see IBO 7/15/11). Shares tumbled 17.6% the following day. On July 27, the company reported a slightly narrower-than-expected EPS loss (see page 12) due to lower operating expenses. Shares dropped 3.7% the next day. Waters missed second-quarter EPS and revenue estimates on July 26 (see page 12) and projected third-quarter EPS of $1.10–$1.15, which was below analysts’ estimates of $1.16. The company maintained its full-year EPS outlook of $4.80–$4.90. Shares contracted 8.1%. Illumina, Thermo Fisher Scientific and PerkinElmer fell 3.7%, 3.9% and 2.7% on the same day, respectively.

While Illumina and Thermo reversed the negative second-quarter earnings trend, selling continued. On July 26, Illumina reported better-than-expected EPS (see page 12) and raised its full-year EPS growth forecast from over 30% to 33%–36%. However, the firm’s full-year EPS outlook of $1.44–$1.50 fell short of analysts’ consensus of $1.50 a share. Given the company’s high valuation and declining gross margins, shares tumbled 17.8% the next day. Thermo reported second-quarter EPS ahead of expectations on July 27 (see page 12) and raised its 2011 EPS outlook by 1% to $4.08–$4.18 for growth of 18%–21%. However, shares fell 2.5%.

Cepheid was the only Index company that was rewarded for its strong earnings report and outlook. The company beat second-quarter EPS estimates on July 21 (see page 12) and raised its full-year EPS outlook to $0.08–$0.11 from a loss of $0.01 to a profit of $0.04. Shares soared 28.9% the next day.

Goldman and Lazard Capital each downgraded Cepheid on July 6 and July 7, respectively, to “Neutral” from “Buy.” Goldman cited its strong year-to-date stock performance and listed a six-month price target of $36 per share. On June 24, Goldman lowered its 2012 and 2013 EPS estimates for Illumina by $0.04 and $0.06 to $2.04 and $2.64, respectively. The company also reduced its price target by $1 to $83 a share. Mizuho upgraded Illumina on July 29 from “Neutral” to “Outperform.”

Process/Metrology/Motion Instrumentation Stock Index

The Process/Metrology/Motion Instrumentation Stock Index contracted 12.4% to 490.78 this month. Five companies dropped in value, while SDIX advanced 7%. Veeco Instruments sustained the largest decline for both the month and year, falling 18% and 7%, respectively. For the year, the Index is up 9.0%. Four firms are trading higher, led by Nanometrics, which has risen 32%, and two have negative returns.

Nanometrics, Veeco and SDIX all reported on July 28. Nanometrics reported better-than-expected second-quarter EPS (see page 12) and projected third-quarter EPS of $0.28–$0.34. Veeco narrowly missed second-quarter EPS estimates (see page 12) but raised its 2010 EPS outlook from over $5.00 to more than $5.25 a share. Third-quarter EPS is expected to be in the range of $1.00–$1.40. SDIX reported a wider EPS loss than a year ago (see page 12) due to increased marketing, sales and R&D investments. Nanometrics, Veeco and SDIX declined 1.7%, 2.8% and 4.9% the next day, respectively.

Credit Suisse initiated coverage of Veeco on July 21 with a “Neutral” rating. The following day, ahead of earnings, UBS lowered its price target on the firm to $51 from $55 due to shipment delays and stricter credit financing in China.

Lab Consumables/Equipment Stock Index

The Laboratory Consumables/Equipment Stock Index fell 10.7% in July to 598.15. Six companies declined, while Kewaunee Scientific sustained a marginal gain. Life Technologies experienced the largest price decline, falling 14%. Year to date, the Index has lost 4.5% in value, with four companies trading lower, two improving and Pall unchanged. Kewaunee Scientific has shown the largest decline, tumbling 27%. Techne is up 15%.

QIAGEN reported on July 25 second-quarter EPS just below expectations (see page 12) and lowered its full-year EPS and revenue growth outlook. The company anticipates EPS to grow 3% to $0.96, including dilution of $0.03 per share from recent acquisitions, compared with a previous EPS growth forecast of 7%–13%. Shares slipped 1.5% the next day. Sigma-Aldrich reported on July 26 second-quarter EPS results ahead of expectations (see page 12) and reaffirmed its full-year EPS forecast of $3.60–$3.75. Shares declined 4.8%. On July 28, Life Technologies fell 5.3% after it missed analysts’ second-quarter EPS and revenue estimates and lowered its full-year EPS outlook by 3% to $3.70–$3.80.

Goldman lowered its 2011 EPS target for Life Technologies on July 24 by $0.01 to $3.87. Goldman also reduced 2012 and 2013 EPS estimates by $0.02 and $0.06 to $4.27 and $4.67, respectively. On July 25, Wedbush downgraded QIAGEN to “Neutral” from “Outperform” and lowered its price target from $24 to $19 a share.

Diversified Instrumentation Stock Index

The Diversified Instrumentation Stock Index fell 10.2% to 135.50 in July. Six firms dropped in value, led by Agilent Technologies, which lapsed 18%. Teledyne Technologies rose 8%. For the year, the Index has gained 1.1%. Six companies have advanced, and Illinois Tool Works (ITW) has declined 7%. Teledyne leads the Index, having climbed 23%.

Danaher raised its 2011 EPS guidance on July 21 by 3% to $2.75–$2.82. The company projected third-quarter EPS of $0.66–$0.72. However, both third-quarter and full-year estimates were at the lower range of analysts’ forecasts of $2.82 and $0.72, respectively. Shares slipped 1.3%. On July 25, Roper raised its 2011 EPS guidance by 5% to $4.20–$4.30 and forecast third-quarter EPS of $1.05–$1.09. Shares climbed 3.2%. On July 26, AMETEK increased its full-year guidance by 4% to $2.30–$2.34 and projected third-quarter EPS of $0.58, $0.01 above estimates. Shares slid 3.3% the next day. Teledyne boosted its 2011 EPS outlook on July 28 by 10% to $3.57–$3.63 and projected third-quarter EPS of $0.83–$0.87, compared with consensus of $0.82. Shares climbed 6.2%.

Mettler-Toledo posted better-than-expected EPS on July 28 (see page 12). It raised full-year EPS guidance by $0.05 to $7.95–$8.05 and predicted third-quarter EPS of $1.87–$1.93. Shares traded marginally higher. ITW missed quarterly EPS and revenue estimates on July 26, leading shares down 8.2%. It projected third-quarter EPS of $0.95–$1.03 and full-year EPS of $4.05–$4.21, which includes a tax settlement of $0.33 a share. On July 19, UBS initiated coverage of AMETEK with a “Neutral” rating and a $47 price target.

International

This month, four Pacific Region companies traded lower and Techcomp improved 5%. JEOL lost the most value for both the month and year, declining 8% and 14%, respectively. Year to date, three companies are up, led by Shimadzu, which has risen 13%, while two companies have declined.

On July 22, HORIBA increased its six-month revenue forecast ending July 30 by 2% to ¥24,500 million ($299 million) and raised its EPS outlook by 48% to ¥87.49 ($1.07). Shares slipped 1.1%. Hitachi High-Technologies reported on July 27 a decline in fiscal first-quarter EPS of 42% to ¥14.79 ($0.18) (see page 12). The company increased its six-month EPS outlook ending September 30 by 39% to ¥36.35 ($0.45). Shares declined 2.3%.

In July, 12 European companies declined and two rallied. Sartorius improved the most, climbing 17%, but Scientific Digital Imaging lost 10%. For the year, ten companies have gained ground, three companies have negative returns and Biotage is unchanged. Oxford Instruments leads all European companies, having risen 40%. Tecan is down 15%.

Spectris announced on July 15 preliminary six-month revenue growth of 25% to £506 million ($823 million), including 5% growth from acquisitions and a 1% loss from currency. Adjusted operating profit is expected to jump 60% to roughly £80 million ($130 million). Shares slipped 2.0%. Sartorius reported on July 25 EPS growth of 50.6% to €1.41 ($2.04) and 12.2% revenue growth for the first half. It raised its 2011 revenue growth outlook by 200 basis points to 8%–10% in constant currency and increased its adjusted operating margin forecast by 50 basis points to 17%–18%. Shares jumped 4.8%. On July 27, Scientific Digital Imaging reported full-year EPS loss ending April 30 of a £0.01 ($0.02), compared with a profit of £0.01 ($0.02) a year ago. Shares fell 9.7%. Renishaw reported on July 28 adjusted EPS growth for the fiscal year ending June 30 of 178% to £0.88 ($1.43) and 59% revenue growth to £288.7 million ($458.3 million), including 5% growth from acquisitions. Shares fell 3.8%.

Line Graph: IBO Instrument Industry Stock Index

 Lab Instrument Stock Index                S&P 500

 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   661.02                           317.14

 Mar-11   661.90                           317.88

 Apr-11   703.32                           326.93

 May-11   721.22                           322.52

 Jun-11   712.55                           316.63

 Jul-11   676.63                           309.83

                         2011                                 2010

 Cos.  Date Rept. FQ   Adj.EPS  Consensus  Vs.Est.   Grw.   Adj.Eps

 Laboratory Instrumentation

 AFFX  27-Jul     2Q   ($0.03)   ($0.04)    $0.01    63%    ($0.08)

 CPHD  21-Jul     2Q    $0.03    ($0.02)    $0.05    NA     ($0.03)

 ILMN  26-Jul     2Q    $0.38    $0.37      $0.01    46%     $0.26

 TMO   27-Jul     2Q    $0.99    $0.98      $0.01    18%     $0.84

 WAT   26-Jul     2Q    $1.08    $1.14     -$0.06    16%     $0.93

 Process/Metrology/Motion Instrumentation

 NANO  28-Jul     2Q    $0.47    $0.46      $0.01    -7%     $0.51

 SDIX  28-Jul     2Q   ($0.03)   NA         NA     -200%    ($0.01)

 VECO  28-Jul     2Q    $1.34    $1.36     -$0.02    33%     $1.01

 Lab Consumables/Equipment

 LIFE  28-Jul     2Q    $0.89    $0.95     -$0.06    -2%     $0.91

 QGEN  25-Jul     2Q    $0.21    $0.22     -$0.01    40%     $0.15

 SIAL  26-Jul     2Q    $0.93    $0.92      $0.01    15%     $0.81

 Diversified Instrumentation

 AME   26-Jul     2Q    $0.59    $0.56      $0.03    40%     $0.42

 DHR   21-Jul     2Q    $0.69    $0.67      $0.02    23%     $0.56

 ITW   26-Jul     2Q    $0.96    $1.02     -$0.06    16%     $0.83

 MTD   28-Jul     2Q    $1.90    $1.86      $0.04    23%     $1.55

 ROP   25-Jul     2Q    $1.08    $0.99      $0.09    46%     $0.74

 TDY   28-Jul     2Q    $1.04    $0.77      $0.27    33%     $0.78

                                   Market Value     52 Week     Price    Change  Change         EPS   EPS  LTD/   FY    R&D/

 Company:  Exchange                 (US $000s)    Low   High  7/28/2011  1Month   YTD   P/E  12Month  FY  Equity  ROE  Sales

 Laboratory Instrumentation            

 Accelrys: o                          $410,668   5.96   8.95    $7.27      2%    -12%   N/A  -0.45  -0.44    4%   N/A    28%

 Affymetrix: o                        $392,698   3.88   8.16    $5.65    -29%     12%   283   0.02  -0.15   38%   N/A    22%

 Becton, Dickinson and Company: n  $18,851,296  66.87  89.75   $83.61     -3%     -1%    16   5.19   4.94   72%   24%     6%

 Bio-Rad Laboratories: n            $3,094,401  85.88 126.98  $109.00     -9%      5%    17   6.51   6.59   54%   12%     9%

 Bruker: o                          $2,870,574  11.82  21.65   $17.22    -15%      4%    31   0.55   0.58   32%   23%    11%

 Caliper Life Sciences: o             $424,224  3.10    8.68    $8.15      0%     29%   116   0.07   0.08   13%    5%    15%

 Cepheid: o                         $2,506,886  14.24  40.98   $37.76      9%     66%   944   0.04  -0.10    6%   N/A    20%

 Fluidigm: o                          $182,388  13.13  20.20   $16.96      1%     21%   N/A  -7.52  -8.94   11%   N/A    39%

 Harvard Bioscience: o                $149,255   3.22   6.26    $5.06     -5%     24%     8   0.64   0.65   24%   21%     4%

 Helicos BioSciences: o                $12,737   0.06   0.85    $0.15    111%     25%     0   0.87   0.87   69%   10%    20%

 Illumina: o                        $8,853,224  42.60  79.40   $62.45    -17%     -1%    72   0.87   0.87   69%   10%    20%

 Luminex: o                           $860,907  14.25  21.89   $20.35     -3%     11%   113   0.18   0.12    5%    2%    17%

 MOCON: o                              $92,642  10.43  17.67   $16.89     10%     31%    19   0.91   0.84    1%   16%     7%

 Pacific Biosciences: o               $580,845  10.27  17.47   $11.01     -6%    -31%   N/A  -2.73 -14.10    2%   N/A    N/A

 PerkinElmer: n                     $2,816,324  18.91  28.75   $24.46     -9%     -5%    20   1.20   1.15   46%    7%     6%

 Pressure BioSciences: o                $2,128   0.68   2.29    $0.75    -26%    -46%   N/A  -1.20  -1.35    1%   N/A    92%

 Sequenom: o                          $698,439   5.47   8.71    $7.06     -6%    -12%   N/A  -1.55  -1.69    3%   N/A    92%

 Thermo Fisher Scientific: n       $23,453,127  41.74  65.86   $60.09     -7%      9%    23   2.63   2.53   42%    7%     3%

 Transgenomic: o                       $71,475   0.30   1.85    $1.45    -17%    120%   N/A  -0.09  -0.04  313%   N/A    11%

 Waters: n                          $8,197,500  60.01 100.00   $87.89     -8%     13%    20   4.46   4.06   47%   36%     5%

 X-Rite: o                            $414,016   3.19   5.08    $4.86     -2%      6%   N/A  -0.12   0.04   89%    2%    11%

 Process/Metrology/Motion Instrumentation            

 FEI Company: o                     $1,391,017  16.51  41.56   $33.04    -13%     25%    19   1.77   1.34   19%    8%    10%

 MTS Systems: o                       $624,176  26.17  48.72   $39.41     -6%      5%    18   2.14   1.14   10%   11%     4%

 Nanometrics: o                       $395,935   8.69  21.56   $16.89    -11%     32%     7   2.58   2.43   10%   33%    10%

 SDIX: o                               $43,899   1.52   3.13    $2.15      7%     22%   N/A  -0.08  -0.05    1%   N/A    11%

 Veeco Instruments: o               $1,711,050  30.25  57.67   $39.79    -18%     -7%     7   5.93   6.13    0%   34%     1%

 Zygo: o                              $219,648   6.97  16.51   $12.00     -9%     -2%    13   0.96  -0.37    4%   N/A    14%

 Lab Consumables/Equipment            

 Enzo Biochem: n                      $147,756   3.33   5.83    $3.84    -10%    -27%   N/A  -0.38  -0.59    0%   N/A    10%

 Kewaunee Scientific: o                $25,658   9.56  14.25    $9.90      0%    -27%    14   0.72   0.72   30%    6%     0%

 Life Technologies: o               $8,353,650  41.10  57.25   $45.03    -14%    -19%    23   1.95   1.99   68%    9%    10%

 Pall: n                            $5,886,286  33.72  59.50   $49.58    -12%      0%    21   2.31   2.03   65%   20%     3%

 QIAGEN: o                          $4,082,269  16.58  22.20   $16.94    -11%    -13%    31   0.55   0.60   40%    6%    12%

 Sigma-Aldrich: o                   $8,320,400  51.44  76.16   $67.10     -9%      1%    20   3.39   3.12   23%   19%     3%

 Techne: o                          $2,818,933  57.00  86.43   $75.79     -9%     15%    26   2.95   2.94   N/A   22%     9%

 Diversified Instrumentation            

 Agilent Technologies: n           $14,966,800  26.68  55.33   $42.16    -18%      2%    17   2.52   1.94   78%   20%    11%

 AMETEK: n                          $6,894,138  27.75  47.00   $42.50     -5%      8%    20   2.12   1.76   79%   16%     2%

 Danaher: n                        $34,111,757  35.24  56.09   $49.11     -7%      4%    15   3.20   2.64   64%   13%     5%

 Illinois Tool Works: n            $24,992,678  40.33  59.27   $49.80    -12%     -7%    13   3.79   3.03   39%   16%     1%

 Mettler-Toledo Int'l: n            $5,110,880 107.90 193.56  $154.81     -8%      2%    21   7.44   6.80  112%   30%     5%

 Roper Industries: n                $8,033,372  56.96  88.76   $81.63     -2%      7%    21   3.97   3.34   58%   12%     4%

 Teledyne Technologies: n           $2,022,779  35.34  55.00   $54.23      8%     23%     8   6.75   3.27   45%   15%     3%

 Laboratory Instrumentation Stock Index                        676.63   -5.0%    2.5%    21                 47%   10%     7%

 Process/Metrology/Motion Instrumentation                      490.78  -12.4%    9.0%    11                  9%   21%     5%

 Lab Consumables/Equipment Stock Index                         598.15  -10.7%   -4.5%    22                 50%   12%     7%

 Diversified Instrumentation Stock Index                       135.50  -10.2%    1.1%    16                 60%   15%     4%

 Dow Jones Industrial Average                               12,143.24   -2.2%    4.9%      

 S&P 500                                                     1,292.28   -2.1%    2.8%      

 NASDAQ Composite                                            2,756.38   -0.6%    3.9%     

      

                                                                Price         

 Region                          Market Value   Market Value  7/28/2011  Change  Change        EPS    EPS    LTD/   FY   R&D/

 Company                           (US $000s)   (Local 000s)   (Local)   1Month   YTD   P/E  12Month  FY   Equity  ROE  Sales

 Pacific Shares             

 Hitachi High-Technologies: t      $2,958,242   ¥229,419,385   ¥1668      -5%    -12%   14  ¥118.20  ¥129.07  11%   7%    3%

 HORIBA: t                         $1,399,249   ¥108,515,363   ¥2566      -1%     11%   12  ¥205.36  ¥187.11  17%   9%    8%

 JEOL: t                             $251,751    ¥19,523,938    ¥246      -8%    -14%   70    ¥3.51    ¥3.51  93%   1%    5%

 Shimadzu: t                       $2,726,691   ¥211,461,965    ¥715      -3%     13%   34   ¥20.77   ¥20.77  26%   6%    4%

 Techcomp: si                         $81,994      SGD98,813 SGD0.43       5%      1%    8    $0.04    $0.04   8%  18%    0%

 European Shares             

 Halma: l                          $2,485,544     £1,524,879   £4.05      -2%     13%   21    £0.19    £0.19  46%  20%    5%

 Oxford Instruments: l               $814,424       £499,649   £9.86       7%     40%   15    £0.64    £0.64  28%  34%    7%

 Renishaw: l                       $1,996,794     £1,225,031  £16.83      -4%     37%   19    £0.90    £0.90  35%  30%   10%

 Scientific Digital Imaging: l         $3,949         £2,423   £0.14     -10%    -10%   12    £0.01    £0.01   0%  N/A    5%

 Spectris: l                          $29,634     £1,818,060  £15.70      -1%     20%   19    £0.82    £0.82  36%  19%    8%

 Alpha MOS: c                         $10,791        € 7,567  € 2.89      -5%      9%  N/A  -€ 0.14  -€ 0.14  11%  N/A   N/A

 Analytik Jena: g                     $64,074       € 44,933  € 8.65      -7%      3%   87   € 0.10   € 0.34  53%   5%   10%

 Biohit: h                            $46,766       € 32,795  € 2.37      -1%     13%  N/A  -€ 0.01   € 0.00  69%   2%    6%

 CyBio: g                              $7,322        € 5,135  € 1.02      -3%      1%    7   € 0.14   € 0.14   2%  13%    6%

 Sartorius: g                        $787,105      € 551,967 € 37.00      17%     31%   14   € 2.58   € 2.29  88%  12%    6%

 Tecan: s                            $948,554    CHF 759,508 CHF66.6      -5%    -15%   15  CHF4.43  CHF4.43   5%   7%   10%

 Datacolor: s                         $83,523     CHF 66,877CHF420.0      -2%     -3%   14 CHF31.05 CHF29.26   5%   0%    9%

 Biotage: st                             $932      SEK 5,929  SEK6.7      -1%      0%  N/A -SEK4.93 -SEK4.91   6%  N/A    9%

 Exiqon:  no                          $82,317    DKK 430,025 DKK12.9      -2%     36%  N/A -DKK1.06 -DKK1.28   4%  N/A   32%