In July, the Dow Jones Industrial Average enjoyed its largest one month gain in a year, climbing 7.1%. The S&P 500 and NASDAQ each gained 6.9%. Initial earnings optimism from the financial sector coupled with a modest dip in the unemployment rate from 9.7% to 9.5% sent the Dow, S&P 500 and NASDAQ each up over 5.0% for the week ending July 9. Equity markets were further boosted by better-than-expected earnings from several prominent companies.

However, the enthusiasm was partially suppressed by a cautiously optimistic economic report from the Federal Reserve, lower manufacturing data and declining consumer confidence. On July 14, the Fed lowered its 2010 US GDP growth forecast by 20 basis points to 3.0%–3.5%, reduced the upper range of its 2011 forecast by 30 basis points to 3.5%–4.2% and expressed further trepidation over unemployment. In addition, according to the estimates released by the US Department of Commerce, the second-quarter GDP rate slowed to 2.4%, compared to 3.7% in the first quarter. For the year, the Dow is up 0.4%, while the S&P 500 and NASDAQ are down 1.2% and 0.6%, respectively.

Three of the IBO Stock Indexes recorded positive returns in July, but the Laboratory Instrumentation Index declined 3.4%. The Process/Metrology/Motion Instrumentation, Lab Consumables/Equipment and Diversified Instrumentation Stock Indexes grew 7.1%, 3.7% and 3.3%, respectively.

Laboratory Instrumentation Stock Index

Symyx Technologies was removed from the Laboratory Instrumentation Index following its merger with Accelrys on July 1 (see IBO 6/30/10). For the month, the Index contracted 3.4% to close at 513.20, with 10 companies improving, 10 declining and X-Rite unchanged. Helicos BioSciences recorded the largest price increase, climbing 23%, while Beckman Coulter fell 24%. For the year, the Index is down 9.3%, making it the worst-performing IBO Index. Twelve companies have positive returns, and nine companies are trading lower. X-Rite leads the Index, up 70%, while Helicos is down 48%.

Earnings reports for Index companies were mixed. On July 7, Affymetrix lowered its second-quarter revenue guidance by 11.7% (see IBO 7/15/10). Shares fell 27.2%. On July 21, the company reported a loss of $0.08 per share, $0.01 wider than estimates, and a 12.1% revenue decline (see page 12). Shares slid 2.8% the following day. However, Affymetrix rebounded 7.9% on July 26, following the introduction of its validated SNP database for the design of custom genotyping arrays.

Beckman Coulter reported EPS of $0.84 on July 22, $0.23 below consensus, and lowered its full-year EPS outlook by 10.2% to $3.90–$4.00. The company also reduced its 2010 revenue forecast by 3.3% to $3.65–$3.7 billion, leading shares down 21.1% the following day. On July 27, Thermo Fisher Scientific announced EPS of $0.84 (see page 12), in line with expectations, but lowered its 2010 revenue guidance by 0.5% to $10.60–$10.75 billion due to currency effects. Shares fell 9.5% the following day.

Other Index companies’ financial results were greeted more warmly. Cepheid announced on July 22 a loss of $0.03 per share, $0.07 narrower than expected, and 21.0% revenue growth. The company increased the lower range of its revenue forecast by 2.6% to $200–$205 million, and boosted its full-year EPS range to $0.05–$0.09 from between a loss of $0.05 and a profit of $0.02 a share. Cepheid jumped 12.0% the following day. On July 27, Illumina announced EPS of $0.26, $0.03 better than consensus, and revenue growth of 31.2% (see page 12). The company upped its 2010 revenue outlook by 7% to $852 million for growth of 28%, and increased the lower range of its EPS guidance by 3% to $0.93–$1.00. Shares climbed 6.8% the following day.

On July 28, both Waters and Bruker beat EPS forecasts by $0.03. Bruker reported EPS of $0.15 and revenue growth of 19.2% (see page 12), leading shares up 8.0%. Waters reported EPS of $0.93 and 7.8% revenue growth (see page 12). Waters also raised its 2010 EPS guidance by 1% to $3.92–$4.02, and projected full-year revenue growth of 6%–7%. Shares climbed 4.7%.

On July 29, Becton Dickinson (BD) announced fiscal third-quarter EPS of $1.29, $0.05 better than expectations, and 3.2% revenue growth. The company raised the lower range of its 2010 EPS outlook by 1% to $5.10–$5.15, but lowered its full-year revenue forecast by 100 basis points to 5% growth due to currency and lower lab testing revenue. Shares declined 1.2%. On July 13, Sequenom climbed 11.0% in anticipation of favorable comments from Dr. Dennis Lo, the company’s science advisor. However, Sequenom surrendered most of its gains the following week due to the lack of specific test data.

Oppenheimer initiated coverage of Illumina with a “Perform” rating on July 14. The following day, the company was downgraded by GARP Research to “Neutral” from “Buy.” CL King downgraded BD on July 20 to “Neutral” from Strong Buy.” On July 21, Jefferies initiated coverage of Sequenom with a “Hold” rating, while Ladenburg Thalmann upgraded shares to “Buy” from “Neutral.” On July 23, following Beckman Coulter’s earnings report, Robert W. Baird and Gleacher & Company each downgraded the company to “Neutral” from “Outperform” and “Buy,” respectively. Jeffries lowered its rating to “Hold” from “Buy”, and RBC Capital Markets downgraded shares to “Sector Perform” from “Outperform.”

Process/Metrology/Motion Instrumentation Stock Index

In July, the Process/Metrology/Motion Instrumentation Stock Index jumped 7.1% to 367.01. Three companies traded higher and five companies lost ground. Veeco Instruments led the Index, gaining 26%, and Nanometrics fell 10%. Year to date, the Index is down 0.4%, with half the companies in positive territory and the other half trading lower. Sigma-Aldrich has recorded the largest gain, rising 11%, and Kewaunee Scientific is down 22%.

On July 8, Oppenheimer downgraded Nanometrics to “Perform” from “Outperform,” and cut its price target to $10 from $13, citing the company’s loss of business from Intel, which may impact 2011 revenues by $30 million. Shares fell 20.0%. However, Nanometrics rebounded 11.7% the following day after it reaffirmed its outlook. On July 15, Piper Jaffray downgraded Veeco to “Neutral” from “Overweight,” and cut its price target from $69 to $44, leading shares down 6.6%.

Veeco climbed 10.5% on July 7 due to earnings optimism and the introduction of its atomic force microscope–Raman System. On July 26, Veeco reported EPS of $1.01, $0.17 ahead of expectations, and revenue growth of 251.3%. Yet shares slipped 2.8% the following day. On July 27, MTS Systems announced the settlement of a patent infringement lawsuit with Hysitron for $7.5 million, for which $1.5 million had already been accrued. The company’s third-quarter earnings will be negatively impacted by $6.3 million, or $0.24 a share. Shares fell 3.4% the following day.

Lab Consumables/Equipment Stock Index

Millipore was removed from the Laboratory Consumables/Equipment Stock Index following its acquisition by Merck KGaA on July 15 (see IBO 7/15/10). The Index improved 3.7% in July to 517.82. Five companies traded higher, while Life Technologies and Pall were down 9% and 3%, respectively. Enzo Biochem led the Index, rising 13%. Year to date, the Index has gained 3.3%. Five companies are in positive territory and two companies are trading lower. Sigma-Aldrich has shown the largest increase, gaining 11%. Kewaunee Scientific is down 22%.

Oppenheimer initiated coverage of Life Technologies on July 14 with an “Outperform” rating. On July 29, Life Technologies reported EPS of $0.91, $0.04 better than expectations, and revenue growth of 7.9% (see page 12). The company increased the lower range of its 2010 EPS guidance by 1.5% to $3.35–$3.50, yet shares fell 6.2%.

On July 22, Sigma-Aldrich reported EPS of $0.81, $0.04 ahead of consensus, and revenue growth of 6.1% (see page 12). The company reaffirmed its 2010 EPS outlook of $3.05–$3.20. Shares rose 1.8%. On July 14, Pall completed a new $500 million five-year credit agreement, improving the company’s liquidity. Shares traded marginally higher.

Diversified Instrumentation Stock Index

The Diversified Instrumentation Stock Index expanded 3.3% to 103.32 in July, and is up 1.6% for the year. For the both the month and year, five companies have increased in value, while Agilent Technologies has declined 2% and 10%, respectively. Roper Industries led the Index for both the month and year, improving 12% and 19%, respectively.

AMETEK increased its second-quarter EPS guidance on July 21 by 15% to $0.62–$0.63, and raised its 2010 EPS outlook by 9% to $2.43–$2.47. Shares slipped 0.8%. The company reported on July 27 EPS of $0.63, $0.01 better than expected, and 12.8% revenue growth. Shares declined 2.9%. The following day, Danaher reported EPS of $0.56, $0.03 better than consensus, and revenue growth of 23.8%. The company raised its 2010 EPS outlook by 1.6% to $2.16–$2.23, yet shares declined 0.9%. On July 22, Mettler-Toledo announced EPS of $1.55, $0.21 ahead of estimates, and revenue growth of 15.0%. The company raised its 2010 EPS forecast by 1.4% to $6.35–$6.45, yet shares declined modestly the following day. Roper Industries reported on July 26 EPS of $0.75, $0.01 better than consensus, and revenue growth of 12.3%. The company increased its full-year EPS by 2.5% to $3.05–$3.15, sending shares up 2.4%. On July 29, Teledyne Technologies reported EPS of $0.78, $0.07 ahead of consensus, and revenue growth of 0.3%. The company increased its 2010 guidance by 1.7% to $2.95–$3.00, yet shares traded slightly lower.

International

This month, three Pacific Region companies traded lower. Hitachi High-Technologies improved 1% and Techcomp was flat. Year to date, three companies are in positive territory, led by Techcomp, which is up 30%. JEOL has declined the most for both the month and year, sliding 5% and 11%, respectively. On July 21, Horiba increased its six-month revenue forecast ending July 30 by 9.1% to ¥21,600 million ($236 million), but lowered its EPS outlook by 7.2% to ¥21.28 ($0.23). Shares traded modestly lower. Hitachi High-Technologies reported on July 27 fiscal first-quarter EPS of ¥25.66 ($0.28), compared to a loss of ¥14.73 ($0.15) a year ago. The company increased its six-month revenue outlook ending September 30 by 3.2% to ¥323,000 ($3,510 million) and its EPS guidance by 77.1% to ¥45.08 ($0.49). Shares slipped 2.2%.

In July, seven European companies recorded positive returns, six declined and Alpha MOS was flat. Oxford Instruments improved the most, climbing 17%, but Cybio lost 27%. For the year, nine companies have gained ground, three have negative returns and two are unchanged. Biohit leads all European firms, up 67%, and Tecan is down 16%.

Spectris announced on July 16 preliminary six-month results of 9% revenue growth and a 150% increase in adjusted operating profits. Shares climbed 6.7%. On July 26, Sartorius reported first-half EPS growth of 149.9% to €0.97 ($1.28) and revenue growth of 6.3%. In the two days ending July 28, shares jumped 10.7%. On July 28, Renishaw reported adjusted EPS growth for the fiscal year ending June 30 of 240% to £0.31 ($0.47). Shares improved 1.6%.

Line Graph: IBO Instrument Industry Stock Index

Lab Instrument Stock Index S&P 500

Feb-07 537.67 337.29

Mar-07 553.46 340.66

Apr-07 568.74 355.41

May-07 576.11 366.98

Jun-07 573.08 360.44

Jul-07 584.65 348.91

Aug-07 604.22 353.40

Sep-07 648.03 366.05

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

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