Waters Stock Slides After Reporting Q1 Below Expectations, Weak Q2 Guidance

Waters Corp WAT reported a first-quarter FY23 sales decline of 1% year-over-year to $684.67 million and +3% on a constant currency basis, missing the consensus of $697.92 million.

• The Milford, Massachusetts-based company states that growth in broader Asia and Europe was offset by weakness in China and the U.S.
• Adjusted EPS was $2.49, missing the consensus of $2.61.
• Sales into the academic and government markets increased 38% Y/Y, as reported, and 45% Y/Y in constant currency.
• Sales into the pharmaceutical market decreased by 7% and 4% in constant currency; sales into the industrial market were flat and increased by 3% constant currency basis.
• Recurring revenues increased by 8% in Constant Currency, while instrument system sales increased by 3%.    
• Waters CEO Udit Batra said results reflect "a healthy two-year stacked growth rate of 9.4%, and our end-markets are resilient."
• "The acceleration of our growth strategy remains on track, with our pending acquisition of Wyatt Technology anticipated to close in the second quarter of this year. The transaction is expected to deliver immediate growth and adjusted operating margin accretion to Waters and will increase our exposure to large molecule applications," Batra added.
• Waters' net cash provided by operating activities for the quarter was $196.75 million, compared to $197.96 million in 1Q22. Adjusted Free cash flow was $166.45 million.
• 2Q23 Outlook: The company expects organic constant currency sales growth of 1% to 3% and reported sales growth of 1.5% to 3.5%.
• It expects Adjusted EPS of $2.52 to $2.62, versus a consensus of $2.88.
• FY23 Outlook: Waters expects organic constant currency sales of 3% to 5% (prior 5% to 6.5%) and reported sales growth of 5.5% to 7.5% (prior 2% to 3%).
• It sees Adjusted EPS of $12.55 to $12.75 versus the consensus of $12.7.

Price Action: WAT shares are trading lower by 7.31% at $274.83 on the last check Tuesday.

Image: Courtesy of Waters