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Waters' (WAT) Earnings Beat, Revenues Miss Estimates in Q3
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Waters Corporation (WAT - Free Report) delivered third-quarter 2018 non-GAAP earnings of $1.92 per share, surpassing the Zacks Consensus Estimate by 2 cents. The figure increased 8.5% on a year-over-year basis but declined 1.5% sequentially.
Net sales also declined 3.1% sequentially but improved 2.2% year over year to $578.02 million. However, the figure missed the Zacks Consensus Estimate of $588.1 million.
Sluggish improvement in the year-over-year top-line growth can be attributed to unfavorable foreign exchange fluctuations. Moreover, the company did not witness strong performance in the pharmaceutical and industrial markets.
Nevertheless, robust year-over-year improvement in the Governmental & Academic market aided the results. Further, the company’s solid momentum in Asia drove the top line.
Coming to the price performance, shares of Waters have lost 10.7% on a year-to-date basis compared with the industry’s decline of 6.1%.
Notably, the company remains optimistic about its strengthening growth initiatives which are likely to help it in gaining investors’ confidence in the near term as well as long haul.
Top Line in Detail
Waters’ net sales figure can be categorized into four ways:
By Operating Segment: The company operates in two organized segments — Waters and TA.
Waters segment (89.2% of net sales) generated $515.8 million of sales, up 2.3% from the year-ago quarter. Sales in TA segment came in $62.2 million and accounted for 10.8% of the net sales. The figure reflected mere year-over-year growth of 1%.
By Products & Services: This division comprises three segments — Instruments, Services and Chemistry.
Instruments sales (48.9% of sales) came in $282.5 million, down 0.1% on a year-over-year basis.
Service sales (34.5% of the sales) were $199.5 million. The figure increased 5% year over year.
Chemistry sales (16.6% of the sales) were in $95.9 million, increasing 3.3% from the year-ago quarter.
Moreover, service and chemistry sections together generated recurring revenues of $295.5 million, up 4.4% from the year-ago quarter.
By Markets: The company serves three end markets — Pharmaceutical, Industrial and Governmental & Academic.
Pharmaceutical market (56.3% of net sales) generated sales of $325.2 million, up 1% on a year-over-year basis.
Industrial market (29.7% of sales) sales came in $171.9 million, increasing 2.1% from the year-ago quarter.
Governmental & Academic (14% of sales) generated $80.9 million of sales. The figure was up 7.6% year over year.
By Geography: This company’s operating regions include Asia, Americas and Europe.
Asia (38.4% of net sales) generated $222.2 million of sales for the company. The figure was up 6.1% on a year-over-year basis.
Americas (35.8% of sales) generated $206.8 million of sales, up 2% year over year.
Europe (25.8% of sales) generated $149.02 million of sales, decreasing 2.7% from prior-year quarter.
Waters Corporation Price, Consensus and EPS Surprise
In the reported quarter, non-GAAP selling and administrative expenses were $126.3 million, reflecting a decrease of 1.9% year over year and 6.7% from the previous quarter.
Further, research and development spending was $35.2 million, up 4.1% year over year but down 1.2% sequentially.
Adjusted operating margin was 30.3%, expanded 100 basis points (bps) from the year-ago quarter but contracted 20 bps sequentially.
Balance Sheet & Cash Flow
As of Sep 29, 2018, cash, cash equivalents and investments came in $2.08 billion, lower than $2.24 billion as of Jun 30, 2018.
Further, total liabilities were $2.17 billion which declined slightly from $2.18 billion in the previous quarter.
Waters also generated free cash flow of $135.6 million in the third quarter.
Guidance
For fourth-quarter 2018, Waters expects non-GAAP earnings in the range of $2.55-$2.65 per share. The Zacks Consensus Estimate for earnings is pegged at $2.69.
The company anticipates net sales growth between 3% and 4% on a constant currency basis. The Zacks Consensus Estimate for sales is currently projected at $714.3 million.
For 2018, Waters revised its guidance downward for non-GAAP earnings, which are now anticipated to lie in the range of $8-$8.10 per share, from the previously guided range of $8.05-$8.20 per share. The Zacks Consensus Estimate for 2018 earnings is pegged at $8.11 per share.
Further, the company expects net sales to reflect growth between 3-4% on a constant currency basis. The Zacks Consensus Estimate is pegged at $2.43 billion.
Long-term earnings growth rate for Vishay Intertechnology, Garmin and AMETEK is pegged at 9.16%, 7.35% and 10.97%, respectively.
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Waters' (WAT) Earnings Beat, Revenues Miss Estimates in Q3
Waters Corporation (WAT - Free Report) delivered third-quarter 2018 non-GAAP earnings of $1.92 per share, surpassing the Zacks Consensus Estimate by 2 cents. The figure increased 8.5% on a year-over-year basis but declined 1.5% sequentially.
Net sales also declined 3.1% sequentially but improved 2.2% year over year to $578.02 million. However, the figure missed the Zacks Consensus Estimate of $588.1 million.
Sluggish improvement in the year-over-year top-line growth can be attributed to unfavorable foreign exchange fluctuations. Moreover, the company did not witness strong performance in the pharmaceutical and industrial markets.
Nevertheless, robust year-over-year improvement in the Governmental & Academic market aided the results. Further, the company’s solid momentum in Asia drove the top line.
Coming to the price performance, shares of Waters have lost 10.7% on a year-to-date basis compared with the industry’s decline of 6.1%.
Notably, the company remains optimistic about its strengthening growth initiatives which are likely to help it in gaining investors’ confidence in the near term as well as long haul.
Top Line in Detail
Waters’ net sales figure can be categorized into four ways:
By Operating Segment: The company operates in two organized segments — Waters and TA.
Waters segment (89.2% of net sales) generated $515.8 million of sales, up 2.3% from the year-ago quarter. Sales in TA segment came in $62.2 million and accounted for 10.8% of the net sales. The figure reflected mere year-over-year growth of 1%.
By Products & Services: This division comprises three segments — Instruments, Services and Chemistry.
Instruments sales (48.9% of sales) came in $282.5 million, down 0.1% on a year-over-year basis.
Service sales (34.5% of the sales) were $199.5 million. The figure increased 5% year over year.
Chemistry sales (16.6% of the sales) were in $95.9 million, increasing 3.3% from the year-ago quarter.
Moreover, service and chemistry sections together generated recurring revenues of $295.5 million, up 4.4% from the year-ago quarter.
By Markets: The company serves three end markets — Pharmaceutical, Industrial and Governmental & Academic.
Pharmaceutical market (56.3% of net sales) generated sales of $325.2 million, up 1% on a year-over-year basis.
Industrial market (29.7% of sales) sales came in $171.9 million, increasing 2.1% from the year-ago quarter.
Governmental & Academic (14% of sales) generated $80.9 million of sales. The figure was up 7.6% year over year.
By Geography: This company’s operating regions include Asia, Americas and Europe.
Asia (38.4% of net sales) generated $222.2 million of sales for the company. The figure was up 6.1% on a year-over-year basis.
Americas (35.8% of sales) generated $206.8 million of sales, up 2% year over year.
Europe (25.8% of sales) generated $149.02 million of sales, decreasing 2.7% from prior-year quarter.
Waters Corporation Price, Consensus and EPS Surprise
Waters Corporation Price, Consensus and EPS Surprise | Waters Corporation Quote
Operating Details
In the reported quarter, non-GAAP selling and administrative expenses were $126.3 million, reflecting a decrease of 1.9% year over year and 6.7% from the previous quarter.
Further, research and development spending was $35.2 million, up 4.1% year over year but down 1.2% sequentially.
Adjusted operating margin was 30.3%, expanded 100 basis points (bps) from the year-ago quarter but contracted 20 bps sequentially.
Balance Sheet & Cash Flow
As of Sep 29, 2018, cash, cash equivalents and investments came in $2.08 billion, lower than $2.24 billion as of Jun 30, 2018.
Further, total liabilities were $2.17 billion which declined slightly from $2.18 billion in the previous quarter.
Waters also generated free cash flow of $135.6 million in the third quarter.
Guidance
For fourth-quarter 2018, Waters expects non-GAAP earnings in the range of $2.55-$2.65 per share. The Zacks Consensus Estimate for earnings is pegged at $2.69.
The company anticipates net sales growth between 3% and 4% on a constant currency basis. The Zacks Consensus Estimate for sales is currently projected at $714.3 million.
For 2018, Waters revised its guidance downward for non-GAAP earnings, which are now anticipated to lie in the range of $8-$8.10 per share, from the previously guided range of $8.05-$8.20 per share. The Zacks Consensus Estimate for 2018 earnings is pegged at $8.11 per share.
Further, the company expects net sales to reflect growth between 3-4% on a constant currency basis. The Zacks Consensus Estimate is pegged at $2.43 billion.
Zacks Rank & Stocks to Consider
Waters carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the broader technology sector are Vishay Intertechnology (VSH - Free Report) , Garmin (GRMN - Free Report) and AMETEK (AME - Free Report) . While Vishay Intertechnology and Garmin flaunt a Zacks Ranks #1 (Strong Buy), AMETEK carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Vishay Intertechnology, Garmin and AMETEK is pegged at 9.16%, 7.35% and 10.97%, respectively.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>