Three of the Four IBO Stock Indexes Continue to Decline

This month, investors were left to weigh negative news involving liquidity issues in the financial markets after the collapse of Bear Sterns. At the same time, they had to consider the Federal Reserve’s 75 basis-point cut in interest rates on March 18 to 2.25%, which was designed to increase the availability of credit in the financial system. Ongoing concerns over other major financial institutions’ exposure to bad debt from subprime residential mortgage–backed investments and other high-risk securities has increased fears of demise to another one of the major banks, similar to Bear Sterns.

Yet, in spite of the economic uncertainty and barrage of negative financial news, the markets ended a volatile month with only modest changes. The NASDAQ ended March in positive territory, up 0.3%, while the Dow Jones Industrial Average and S&P slipped 0.03% and 0.6%, respectively.

Most investors remain cautious as they await positive economic data and first-quarter corporate earnings before committing additional capital to the markets. Likewise, most analysts remain cautious, searching for any positive economic news to signal a turn around or any technical indication that a bottom of the markets has been reached. As first-quarter corporate earnings come in, investors will pay close attention to earnings’ expectations to get a better idea of the economic outlook. Providing some relief, oil prices declined during March from the recent highs of over $1.10 a barrel to close the month at $101.55 a barrel, but the decline is based on fears of a slowing economy and declining demand for commodities.

For March, three of the four IBO Stock Indexes traded lower, while the Diversified Instrumentation Stock Index improved 1.3%.The Laboratory Instrumentation, Process/Metrology/Motion Instrumentation and Lab Consumables/Equipment Stock Indexes slipped 1.2%, 1.3% and 0.7%, respectively.

Laboratory Instrumentation Stock Index

For the month, the Laboratory Instrumentation Index declined 1.2% to close at 600.29. Fourteen companies declined, while nine companies improved. Three companies posted double-digit gains, while two companies were down in double digits. Symyx Technologies led the Index, climbing 15%, while X-Rite fell 27%. For the first quarter, the Index has lost 8.6%, with Combimatrix leading the way, up 28%, while X-Rite continues to weigh on the Index, down 49%.

Several of the Index companies announcing fourth-quarter results this month yielded diverse results.On March 5, MOCON announced fourth-quarter EPS of $0.19 (see page 12) compared to $0.17 in the previous year on record sales, sending shares up 4.9%. On March 4, X-Rite announced adjusted fourth-quarter EPS of $0.09 (see page 12), $0.08 below analysts’ expectations primarily due to higher acquisition and other costs, leading shares down 2.5%. Also, on March 18, OI Corporation reported EPS of $0.08 (see page 12), compared to $0.33 in the previous quarter, primarily due to lower sales, sending shares down 5.5%. Earlier in the month, on March 12, Cepheid reiterated its full-year adjusted net income of $3–$5 million and revenue forecast of $183–$189 million, yet share traded down 3.4%. After the market close on March 6, CombiMatrix reported a loss of $0.58 a share and revenue growth of over 50% for the fourth quarter, yet shares traded down 6.4% the following day.

Analysts’ recommendations helped several stocks in the Index recover earlier losses. On March 12, Caris & Company upgraded Cepheid to “Buy” from “Above Average,” leading shares up 9.0%. On March 20, Cantor Fitzgerald initiated coverage of Squenom with a “Buy” rating, citing strong growth potential in the genetic analysis market, sending shares up 17.6%. On March 26, JP Morgan lowered its 2008 organic growth forecast for Waters to 7.5% from 8.5%. However, JP Morgan upgraded Waters to “Overweight” from “Neutral,” suggesting that the company was attractively valued following its recent price decline, helping shares recover 4.7%.

Process/Metrology/Motion Instrumentation Index

The Process/Metrology/Motion Instrumentation Stock Index fell 1.3% to 315.38, with half of the companies improving and the other half declining. Nanometrics led the Index, climbing 12%, while ICx Technologies fell 41%. For the first quarter, the Index has declined 20.3%, with all eight companies in negative territory, led by ICx, which is down over 50%.

Year-to-date, the Process/Metrology/Motion Instrumentation Index is the worst performing Index and, this month, it was negatively impacted by earnings’ shortfalls and analysts’ recommendations for some of the smaller companies in the Index. After the market close on March 6, RAE Systems reported a loss of $0.12 per share, compared to analysts’ expectations of $0.03 a share, sending shares down 27.3% the following day. On March 7, Morgan Keegan downgraded RAE to “Market Perform” from “Outperform.” After the market close on March 13, ICx Technologies reported a loss of $0.33 a share (see page 12), $0.17 below analysts’ expectations, and lowered its revenue forecast for the first quarter by approximately 20% to $30–$32 million. The following day, Morgan Keegan & Co. downgraded ICx to “Market Perform” from “Outperform,” leading shares down 29.6%.

Lab Consumables/Equipment Stock Index

For March, the Laboratory Consumables/Equipment Stock Index slipped 0.7% to 491.68, with only two companies improving and five companies trading lower. Sigma-Aldrich was the only company with a notable gain, improving 8%, while Kewaunee Scientific fell 16%. For the first quarter, the Lab Consumable/Equipment Index has declined 2.7%, with Kewaunee Scientific up 9% and Sigma-Aldrich down 24%.

On March 31, Pall reported fiscal second-quarter EPS of $0.39 (see page 12), $0.03 ahead of analysts’ expectations, but lowered its full-year EPS to $1.82–$1.92 compared to analysts’ expectations of $2.14 a share, sending shares down 8.3%. Earlier in the month, on March 12, Pall increased its dividend payout by $0.01 to $0.13.

Diversified Instrumentation Stock Index

The Diversified Instrumentation Stock Index gained 1.3% for the month to 102.84. Four companies improved, while Agilent Technologies and Mettler-Toledo declined 3% and 1%, respectively. For the quarter, the Index is down 13.9% with all six companies trading lower, led by Agilent, which has fallen 19%.

After the market close on March 24, Fitch Ratings affirmed its rating outlook of “BBB-” on Agilent following a required payment of a debt obligation of $1.5 billion. Shares traded flat the following day.


In March, all five Pacific Region companies declined, with Techcomp and Hitachi High-Technologies leading the way, both down 20%. For the quarter, all companies finished lower, with five companies down in double digits and Shimadzu lower by 8%.

The European companies faired slightly better, with nine companies declining and six companies improving. Robotic Technology Systems led all companies, up 19%, while Cybio AG dropped 18%. For the first quarter, Whatman leads all European companies, up 40%, while Cybio AG has lost more than half its value.

On March 19, Whatman reported full-year EPS of £0.05 ($0.09) on flat revenue growth (see page 12), compared to £0.19 ($0.35) in the previous year. On March 4, Genetix announced adjusted EPS of 4.07 pence ($0.08) compared to 3.56 pence ($0.07) and revenue growth of 48%, sending shares up 7.1%. On March 31, Biohit announced a loss of €0.12 ($0.16) a share compared to a loss of €0.06 (0.08) a share in the previous year due to weaker than expected revenue growth. On March 26, Robotic Technology Systems reported a loss £0.06 ($0.12) (see page 12), compared to a loss of £0.03 ($0.05) in the previous year, but announced a return to profitability in 2008, leading shares up 3.0%.

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