Waters' 3Q in Line, Rev Down 1%

Zacks

Waters Corporation (WAT) released its third-quarter 2012 earnings before the market opened today, reporting earnings per share from continuing operations of $1.18, in line with the Zacks Consensus Estimate. Earnings in the quarter increased from $1.14 in the third quarter of 2011. Earnings in the quarter benefited from the company’s initiatives to control expenses, maintain disciplined pricing and share repurchases.

Revenue

On the top line, Waters reported total revenue of $450 million for the third quarter, down 1% year over year. Foreign currency translation had a negative impact of 3% on sales. Though a difficult market condition was a challenge for the company, top-line figures increased organically due to a stable pharmaceutical demand and strong sales in Asia.

Income

Operating income for the quarter amounted to $121.7 million compared with $127.3 million in the third quarter of 2011. The company incurred total SG&A expense of approximately $115.3 million in the quarter compared with $121.2 million. R&D expense was around $23.8 million in the quarter versus $23.3 million in the prior-year quarter.

Balance Sheet

Cash, cash equivalents and short-term investments reached approximately $1.45 billion at the end of the quarter compared with $1.28 billion at the end of 2011. Long-term debt was $700.0 million and shareowner’s equity was $1.33 billion at the end of third-quarter 2012.

Moving Ahead

The company believes its strong competitive position and strategic market initiatives will facilitate it to perform well as it moves ahead.

Waters continues to see considerable stability in its end markets and sustained continued momentum in the acceptance of new products. The company continues to introduce new products. 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 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, which carries a Zacks #3 Rank (short-term Hold rating) over the next one-to-three months.

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