Brought to you by Morningstar Healthcare Observer

This weekly installment of "Healthcare Highlights" is brought to you by Morningstar Healthcare Observer. Download your copy of February’s edition, "Our 2010 Outlook for Mergers & Acquisitions," here: http://healthcare.morningstar.com/Default.aspx.

Following last week's results and guidance announcement by Waters, medical instrument makers Thermo Fisher, PerkinElmer, and Mettler-Toledo all reported their fiscal-year results and forecasts this week. These rivals appear to be on the same page regarding their prospects for 2010. Expectations are seemingly measured--a recovery in industrial end markets (which many of them serve with their testing equipment) is anticipated to be tepid, while the prospects for healthcare and life-science research carry a slightly higher degree of optimism. Their drivers for revenue growth also appear similar: a recovery in pharmaceutical spending due to pent-up demand and better comparables, a pick up in government and academic sales due to the NIH stimulus, a boost from emerging markets (China and India), and the return of industrial spending (which will lag recovery within industrial markets).

Another common theme--cost-cutting--was also prominently featured in earnings announcements. The industry as a whole appears to be a lot leaner, with reduced overhead, improved working capital management, and low-cost sourcing. This sets a trajectory for strong earnings growth in the upcoming year.