Waters Has Limited Upside Potential To Growth Expectations; Janney Steps to The Sidelines

There are better alternatives to Waters Corporation WAT in the life sciences tools sector from the perspective of acceleration in organic growth, according to an analyst at Janney.

The Analyst

Paul Knight downgraded Waters Corp from Buy to Neutral and lowered his fair value estimate from $230 to $211.

The Thesis

Growth and earnings at Waters Corp are likely to be in line for Q2, but there's limited scope for upside to the 5-6 percent organic growth estimate for FY2019 or more, Knight said in a Tuesday note.

The analyst noted the company is focused on slower-growth pharmaceutical QC, while it's subject to competitive pressure in biological research from companies such as Thermo Fisher Scientific Inc. TMO, Agilent Technologies Inc A and Sciex. The salesforce reorganization the company is implementing will take time to gain traction, the analyst added.

That said, Knight sees revenue visibility from high China growth and earnings visibility from a 3-year share repurchase authorization.

Instead, Janney prefers LONZA Grp AG/ADR LZAGY, which it recently initiated at a Buy. Knight views the company as positioned for accelerating growth.

Janney also expects a more modest acceleration at Thermo Fisher, with its $2-3 billion of bioproduction exposure.

Price Action

Shares of Waters Corp are nearly flat for the year-to-date period.

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