Profit taking makes for mixed IBO stock indexes

Instrument Business Outlook, August 31, 2008

Despite sustained economic volatility during August, the US equity markets and US dollar strengthened. Investors were encouraged by better-than-expected manufacturing data, consumer confidence and durable goods orders for July, as well as falling crude oil prices, which declined 7% to end the month at $115.45 a barrel. On August 27, the US Commerce Department revised its second-quarter GDP figure up to an annualized growth rate of 3.3% from 1.9% due to increased consumer spending and higher exports. As a result, the Dow, S&P 500 and NASDAQ ended the month in positive territory, climbing 1.5%, 1.2% and 1.8%, respectively. However, economic growth was primarily supported by government stimulus checks and a low US dollar. Year to date, the Dow is down 13.0%, the S&P 500 has dropped 12.6% and NASDAQ has lost 10.7%.

Following strong gains in July, only two of the four IBO Stock Indexes managed to sustain positive momentum. The Laboratory Instrumentation and Process/ Metrology/Motion Instrumentation Stock Indexes improved 0.7% and 5.3%, respectively, while the Lab Consumables/Equipment and Diversified Instrumentation Stock Indexes declined 0.8% and 0.3%, respectively.

Laboratory Instrumentation Stock Index

For the month, the Laboratory Instrumentation Index gained 0.7% to close at 643.46. Fifteen companies improved, while eight companies declined. CombiMatrix led the Index, improving 28%, while Caliper Life Sciences declined 25%. Year to date, the Index has fallen 2.0%, with 12 companies improving, 10 companies declining and one company trading flat. Sequenom continues to lead the Index for the year, up 138%, while X-Rite has lost 65%.

Several companies in the Index reported positive earnings this month. On August 5, MOCON reported second-quarter EPS growth of 12.5% to $0.18, leading shares up 7.4%. On the same day, Bio-Rad Laboratories announced that its adjusted second-quarter EPS grew 66% to $1.58 (see page 12), $0.50 better than analysts' consensus. Shares climbed 12.2% the following day. After the market's close on August 7, Luminex reported an adjusted second-quarter loss of $0.03 a share, in-line with expectations. Shares climbed 4.9% the following day.

Other companies that reported earnings experienced mixed results. After the close on August 7, Dionex reported adjusted fourth-quarter EPS growth of 24.6% to $0.76 (see page 12), beating analysts' estimates by $0.06. However, the company forecasted first-quarter EPS of $0.53-$0.56, well below analysts' expectations of $0.65 a share. The following day, shares declined 7.4%. On August 11, OI Corporation reported second-quarter EPS of $0.07 (see page 12), compared to $0.10 in the previous year, sending shares down 5.5%. After the close on August 11, Harvard Bioscience reported adjusted second-quarter EPS of $0.08, in-line with expectations, and maintained its 2008 EPS guidance, yet shares declined 3.0% the following day. On August 6, Caliper Life Sciences reported an adjusted second-quarter loss of $0.07 a share, $0.04 below analysts' consensus, but maintained its full-year EPS estimate. Shares traded marginally higher. After the market close on August 13, CombiMatrix reported a second-quarter loss of $0.54, $0.01 wider than the previous year. However, shares improved 2.2% the following day due to strong revenue growth. On the previous day, the company filed a $100 million common stock shelf offer, sending shares up 4.4%.

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Weisel downgraded Luminex to "Market-weight" from "Overweight" on August 18, leading shares down 1.6%. On August 27, Caris & Company initiated coverage of Sequenom to "Below Average," sending shares down 3.7%. In other news, Illumina announced a public offering on August 13 of 3.5 million shares. Shares declined 4.3%. The offering, which increased to 4 million shares, closed on August 13 at a price of $87.50.

Process/Metrology/Motion Instrumentation Stock Index

For August, the Process/Metrology/Motion Instrumentation Stock Index jumped 5.3% to 379.52, with half the companies improving. RAE Systems led the Index, climbing 69%, while Nanometrics and Strategic Diagnostics each fell 17%. Year to date, the Index is down 4.1%, with Nanometrics leading all decliners, down 63%, and only FEI Company and Veeco Instruments trading higher, up 9% and 1%, respectively.

On August 12, ICx Technologies reported a second-quarter loss of $0.26, $0.03 better than analysts' expectations. The firm also reaffirmed its 2008 guidance (see page 6), leading share up 7.6% the following day. On August 14, Zygo announced adjusted fiscal fourth-quarter EPS of $0.06, inline with expectations, yet shares fell 3.6% the following day. On August 29, RAE reported a second-quarter EPS loss of $0.01 compared to a loss of $0.05, yet shares traded flat. In other news, on August 11, Veeco Instruments settled a patent suit against Asylum Research (see IBO 8/15/08), sending shares up 4.8%.

Lab Consumables/Equipment Stock Index

The Laboratory Consumables/ Equipment Stock Index declined 0.8% to 511.67, with four companies improving and three companies trading lower. Kewaunee Scientific improved the most, climbing 26%, while Sigma-Aldrich fell 7%. For the year, the Index is up 1.3%, with five companies in positive territory and two companies trading lower. Techne leads the Index, having gained 17%, while Kewaunee Scientific is down 28%.