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Will Waters (WAT) Beat Earnings This Quarter?

Zacks Equity Research

We expect scientific instruments manufacturer Waters Corporation (WAT) to beat expectations when it reports fourth-quarter 2013 results on Jan 28, 2014.

Why a Likely Positive Surprise?

Our proven model shows that Waters is likely to beat earnings because it has the right combination of two key ingredients.

Zacks ESP: Earnings Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at 0.62%. This is a leading indicator of a likely positive earnings surprise for shares.

Zacks Rank #3 (Hold): Note that stocks with Zacks Ranks of #1, 2 or 3 have a significantly higher chance of beating earnings. Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement. 

The combination of Waters’ Zacks Rank #3 and 0.62% ESP makes us very confident of a positive earnings beat on Jan 28.

What is Driving the Better-Than-Expected Earnings?

Global demand is increasing strongly in the company’s end markets, especially in China, Europe and Latin America. Moreover, with increased R&D investment, Waters always launches new products in the market which attract new revenue opportunities. Additionally, Waters is in a healthy position owing to strategic acquisitions including Baehr Thermoanalyse GmbH and Blue Reference, Inc. made last year which are expected to contribute approximately $10 million to annual sales going forward. 

Although, the company has been experiencing slower-than-expected growth in both the top and bottom lines, it reported a year-on-year increase in both earnings and revenues in the third-quarter results. Further, fair pricing of products and its cost-control effort helped the company deliver stable levels of profitability. Waters has continued to benefit from newer core offerings in chromatography, mass spectrometry and thermal technologies.

Other Stocks to Consider

Waters is not the only firm looking up this earnings season. We also see likely earnings beats coming from these companies:

Nokia Corp. (NOK), with Earnings ESP of +33.33% and a Zacks Rank #1 (Strong Buy).

GigOptix Inc. (GIC), with Earnings ESP of +25.00% and a Zacks Rank #2 (Buy).

Gorman-Rupp Co. (GRC), with Earnings ESP of +4.00% and a Zacks Rank #2.

Read the Full Research Report on WAT
Read the Full Research Report on GIC
Read the Full Research Report on NOK
Read the Full Research Report on GRC

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