The Dow Jones Industrial Average and S&P 500 traded at record highs in July despite weak economic data. The US economy grew at a tepid 1.2% in the second quarter, well below growth expectations of 2.6%. Specifically, the variance in growth projections was attributed to lower residential and business spending, which dropped 3.2%, the most in seven years. However, consumer spending, which accounts for a majority of economic growth, was particularly strong, climbing 4.2% at an annualized rate. In addition, exports advanced for the first time in the last four quarters. For July, the Dow, S&P 500 and NASDAQ improved 2.8%, 3.6% and 6.6%, respectively. Year to date, the Dow, S&P 500 and NASDAQ are up 5.8%, 6.3% and 3.1%, respectively.

Laboratory Instruments and Products

The Index climbed 8.8% in July to 267.59 and is up 9.2% for the year. All but three companies traded higher this month, led by QIAGEN, which jumped 22.9% thanks to stronger-than-expected second quarter sales (see page 12) and adjusted EPS results on July 29. However, the company maintained its 2016 adjusted EPS outlook of $1.10–$1.11, which includes a neutral impact from the acquisition of Exiqon (see IBO 3/31/16) but currency headwinds of $0.01–$0.02. Third quarter adjusted EPS is expected to be $0.28.

Likewise, Illumina posted a strong second quarter adjusted EPS surprise on July 26, leading shares up 18.6% for the month. In spite of this, the company maintained its 2016 EPS outlook of $3.48–$3.58 due to a slower demand in Europe, for which sales declined 4%. On July 5, Morgan Stanley downgraded the company from “Equal Weight” to “Underweight,” and lowered its price target from $130 to $110 per share due to valuation concerns.

Prices for several other companies in the Index jumped after favorable earnings results this month. Waters and Mettler-Toledo climbed 13.0% and 12.8% in July, respectively, as the two companies soundly beat second quarter sales and adjusted EPS expectations on July 28. Waters, which ended the month at a record high share price, benefited from strong biopharmaceutical sales along with positive currency contributions to the bottom line. The company raised its full-year adjusted EPS outlook by 4% at the midpoint to $6.45–$6.60. Third quarter adjusted EPS is expected to be $1.52–$1.62. Mettler-Toledo raised its full-year adjusted EPS range by $0.15 to $14.40–$14.50 as a result of strong operational growth and acquisitions. Third quarter adjusted EPS is projected to be $3.65–$3.70.

Thermo Fisher Scientific advanced 7.5% for the month as it beat second quarter adjusted EPS consensus on July 28. Like Waters, earnings for Thermo Fisher benefited from biopharmaceutical sales, favorable currency impact and strong demand in China. The company raised its 2016 adjusted EPS range from $8.05–$8.19 to $8.07–$8.20 for growth of 9%–11% due to stronger operational performance. Earlier in the month, on July 7, the company authorized a $1.5 billion share repurchase program with no expiration date. On July 22, BTIG Research upgraded Thermo Fisher from “Neutral” to “Buy” and set a price target of $180 per share.

In contrast, Luminex was pressured following an ambiguous outlook despite a strong earnings report. The company soared past second quarter adjusted EPS consensus on July 28 due to a strong replacement cycle for multiplexing analyzers. The company also raised its 2016 sales outlook by $14 million to $261–$269 million to include the acquisition of Nanosphere. However, excluding the transaction, the company’s midpoint sales guidance was slightly below its previous outlook as one of its customers, LabCorp, transitions from Luminex’s cystic fibrosis array platform to NGS. Shares fell 5.1% after the earnings report but ended the month up 5.9%.

Other double-digit price increases in July included Pacific Biosciences, which climbed 21.6%. The strong price appreciation may have been attributed to continued acquisition rumors or potentially stronger-than-expected second quarter results, which are scheduled for August 4. Enzo Biochem and Fluidigm each vaulted 16.8% for the month. On July 7, Enzo Biochem announced a patent infringement settlement against Illumina for $21 million (see page 2).

In other financial news, on July 19, PerkinElmer issued a €500 million ($555 million) Senior Notes offering due 2026 to be used to repay an unsecured revolving credit facility. Shares increased 8.6% for the month.

Diversified Laboratory

For the month, the Index declined 1.5% to 200.94, but is up 7.1% year to date. Most companies traded higher in July, led by Illinois Tool Works, which jumped 10.8%. On July 20, the company reported better-than-expected second quarter adjusted EPS, and raised its 2015 GAAP outlook by $0.10 to $5.50–$5.70.

Honeywell and Corning also beat second quarter adjusted EPS consensus on July 22 and July 27, respectively. Honeywell, which was flat for the month, increased the lower end of its 2016 EPS guidance by $0.05 to $6.60–$6.70. Corning advanced 8.5% for the month despite slower projected growth for the Specialty Materials segment. However, on July 7, Goldman Sachs upgraded the company from “Buy” to “Conviction-buy,” but maintained a price target of $27 per share.

Danaher also posted strong second quarter financial results on July 25 (see page 12), driven by biopharmaceutical markets, flow cytometry sales, as well as strength in China and higher cost synergies. However, given the recent Fortive spin-off (see page 2) as well as higher development costs and increased operating investments, the company cut its full-year adjusted EPS from $4.85–$4.98 to $3.53–$3.60. Shares slumped 19.4% for the month, leading the Index lower.

Roper Technologies slipped 0.1% for the month as it missed second quarter adjusted EPS and sales expectations due to sustained weakness in the oil and gas markets. The company lowered its 2016 adjusted EPS outlook on July 25 from $6.85–$7.15 to $6.57–$6.71.

On July 6, CL King downgraded Teledyne Technologies from “Buy” to “Neutral.”

International

Asia Pacific indexes traded higher in July, except for Malaysia’s KLCI, which was roughly flat. Japan’s Nikkei 225 recorded the largest gain, climbing 6.4% as the Bank of Japan initiated additional monetary easing measures to stimulate the economy. Hong Kong’s Hang Seng and India’s Sensex 30 expanded 5.3% and 3.9% for the month.

For the month, prices for Pacific Region companies in the IBO Stock Table were mixed. Following a sharp decline in June, Hitachi High-Technologies recorded the largest gain for the month, climbing 26.9% due to stronger-than-expected earnings. On July 27, the company reported that fiscal first quarter EPS soared 67% to ¥93.71 ($0.87). The company lowered its half year sales forecast by 4% to ¥310 billion ($287 million) but raised its half year EPS forecast by 33% to ¥130.15 ($1.20). The fiscal year forecast was unchanged.

Precision System Science jumped 23.6% in July on stronger volume but did not report any financial news. Conversely, Techcomp fell 16.5% for the month but has yet to report earnings for the first half of the year. The company is currently switching auditors due to the conversion from a primary listing to a secondary listing on the Singapore exchange. It is maintaining its primary listing status on the Hong Kong exchange.

All major European equity markets traded higher in July, led by Germany’s DAX, which climbed 6.8% due to positive unemployment and consumer price data. Despite concerns over the Brexit vote, the UK’s FTSE 100 improved 3.4% in July due to stronger-than-expected second quarter GDP growth of 2.2%. Nevertheless, economic growth for the eurozone slowed from 0.6% in the first quarter to 0.3% in the second quarter because of certain temporary factors as well as weak consumer spending.

Prices for all UK-based companies in the IBO Stock Table advanced except for Abcam, which slipped 0.6%. Scientific Digital Imaging recorded the largest gain, climbing 16.3%. On July 22, the company reported that fiscal year EPS ending April 30 climbed more than seven fold to 1.15 pence ($0.02). Earnings growth was driven by the acquisition of the electrodes provider Sentek (see IBO 11/15/15).

Spectris, which improved 3.0% for the month, announced on July 28 that half-year adjusted EPS advanced 2% to 43 pence ($0.61). Improved productivity measures more than offset continued weakness in the industrial markets. The company also proposed an interim dividend hike of 4% to 18.0 pence ($0.26) per share.

In other ratings news, on July 21, Beaufort Securities downgraded Oxford Instruments from “Speculative Buy” to “Hold.” However, company shares improved 0.8% for the month.

Among the list of other European companies in the IBO Stock Table, Biotage recorded the largest price increase in July, climbing 18.7%, while Datacolor declined 0.7%. Exiqon was removed from the list of companies following its acquisition by QIAGEN (see IBO 6/30/16).

Sartorius, which advanced 3.8% for the month, announced on July 25 that second quarter adjusted EPS grew 26% to €0.48 ($0.54), driven by strong demand for bioproduction products. The company raised its full-year currency-neutral sales growth outlook from 10%–14% to 15%–18% to account for strong organic demand and acquisitions.