Waters Matches Estimates Again - Analyst Blog

Waters Corp. (WAT) released its second quarter earnings today, before the market opened, which again matched the Zacks Consensus Estimate. The company reported earnings per share from continuing operations of 90 cents, an increase of 25% from 72 cents in the second quarter of 2009.

Revenue

On the top line, WAT outperformed the Zacks Consensus Estimate by $3 million, reporting total revenue of $391 million. Total revenue during the quarter increased by 8% year over year as the company experienced strong demand for its products in key markets.

Specifically, Waters’ chromatography and mass spectrometry systems that was launched in the first half of 2010 received rapid customer acceptance. Moreover, contributing to the company’s revenue growth was recovery in demand for its TA Instruments business and high sales growth in Asia. Foreign currency translation negatively impacted the company’s sales by 1%.

Income

Operating income of the company for the quarter amounted to $105.6 million, compared with $86.7 million in the second quarter of 2009. The company incurred total SG&A expense of approximately $106.9 million versus $109.6 million in the second quarter of 2009.

Balance Sheet

Cash, and cash equivalents and short-term investments were approximately $754.5 million with long-term debt of $700.0 million and shareowner’s equity of $813.0 million.

Our Estimate

As per the Zacks Consensus Estimate, Waters’ revenue is expected to be about $1.59 billion and earnings per share from continuing operation is expected to be about $3.91 in fiscal 2010.

Waters has a strong presence in the chromatography instrument market, which is expected to grow annually over the longer term. The company is currently one of the top three players in the mass spectrometry market. It is expected to experience sustained healthy performance in its organic sales growth over the next few years based on the strong customer demand in mass spectrometry and HPLC. A significant portion of Waters’ revenue is derived from recurring revenue sources, including consumables and services, which are expected to continue to increase over the longer term.

The analytical instrument and systems market is highly competitive. Waters Corp. encounters competition from several worldwide instrument manufacturers and other companies in both domestic and foreign markets for each of its three technologies. The company competes in its markets primarily on the basis of instrument performance, reliability, service and, to a lesser extent, price. Some competitors have instrument businesses that are generally more diversified, but are typically less focused on the company’s chosen markets. Some competitors have greater financial and other resources than Waters.

Major competitors of Waters are Agilent Technologies Inc. (A), Life Technologies Corporation (LIFE) and Thermo Fisher Scientific Inc. (TMO).

Waters Corporation, an analytical instrument manufacturer, designs, manufactures, sells and services, through its Waters Division, high performance liquid chromatography, ultra performance liquid chromatography ® (LC) and mass spectrometry (MS) instrument systems and support products, including chromatography columns, other consumable products and comprehensive post-warranty service plans.

We currently maintain our Neutral rating on Waters, with a Zacks #4 Rank over the next one-to-three months.
Read the full analyst report on "WAT"
Read the full analyst report on "A"
Read the full analyst report on "LIFE"
Read the full analyst report on "TMO"
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