Waters Corp. (WAT) released its third quarter earnings before the market opened today, reporting earnings from continuing operation of 96 cents, slightly below the Zacks Consensus Estimate of 97 cents. Earnings in the quarter increased by 21.5% from 79 cents in the third quarter of 2009.
Revenue
On the top line, WAT outperformed the Zacks Consensus Estimate of $397 million by merely $4 million, reporting total revenue of $401 million. Total revenue during the quarter increased by 7% year over year as the company delivered solid performance in its pharmaceutical and chemical end markets. Foreign currency translation negatively impacted the company’s sales by 2%.
Sales in the quarter were primarily driven by delivery of new instrument systems, including ACQUITY H-Class UPLC and increased demand for the research-focused mass spectrometry products. Good business performance in Americas and Asia accelerated the global demand for Waters’ products.
Income
Operating income for the quarter amounted to $103.8 million compared with $96.1 million in the third quarter of 2009. The company incurred total SG&A expense of approximately $111.3 million versus $102.7 million in the year-ago quarter.
Balance Sheet
Cash and cash equivalents and short-term investments were approximately $837.1 million with long-term debt of $700.0 million and shareowner’s equity of $923.3 million.
Our Estimate
As per the Zacks Consensus Estimate, Waters’ revenue is expected to be approximately $1.6 billion and earnings per share from continuing operations are expected to be about $3.97 in fiscal 2010.
In the long term, we expect Waters to benefit from its strong presence in the chromatography instrument market. A strong customer demand in mass spectrometry and HPLC will help the company to sustain healthy performance in its organic sales growth over the next few years.
Further, 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.
However, the analytical instrument and systems market is highly competitive. Major competitors of Waters are Agilent Technologies Inc. (A), Life Technologies Corporation (LIFE) and Thermo Fisher Scientific Inc. (TMO).
Waters 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.
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 recommendation on Waters, with a Zacks #3 Rank (short-term Hold rating) over the next one to three months.
WATERS CORP (WAT): Free Stock Analysis Report
Zacks Investment Research
