Waters Surpasses Estimates in 2Q

Zacks

Waters Corporation (WAT) reported earnings per share from continuing operations of $1.17 in the second quarter of 2012 compared to $1.00 in the first quarter of 2012, and $1.08 in the year-earlier quarter.

The company’s earnings surpassed the Zacks Consensus Estimate of $1.15 for the quarter. The company’s improved operational efficiency caused the earnings to rise annually amidst of an uncertain global economic situation.

Revenue

On the top line, Waters reported total revenue of $451.5 million for the second quarter, up approximately 1% year over year. Foreign currency translation had a negative impact of 3% on sales. The sales missed the Zacks Consensus Estimate of $458 million.

Income/Expenses

Adjusted gross profit in the quarter was $274.1 million, up 1% from the year-ago quarter. Adjusted SG&A expense decreased from $124.3 million in the year-ago quarter to $119.9 million in the second quarter 2012 while R&D expense of $24 million increased 4.0% in the quarter.

Adjusted operating income for the quarter amounted to $130.2 million compared with $124.2 million in the second quarter of 2011.

Balance Sheet

Exiting second quarter of 2012, Waters had cash, cash equivalents and short-term investments of approximately $1.39 billion compared with $1.35 billion at the end of the previous quarter. Long-term debt was $700.0 million, which remains flat sequentially.

The shareowner’s equity was $1.26 billion at the end of second-quarter 2012 versus $1.29 billion at the end of first-quarter 2012.

Moving Ahead

Waters Corporation continues to see considerable stability in its end markets and continued momentum in the acceptance of 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).

We currently maintain our Neutral rating on Waters, with a Zacks #3 Rank (short-term Hold recommendation) over the next one-to-three months.

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