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Waters (WAT) Q2 Earnings & Revenues Beat Estimates, Rise Y/Y

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Waters Corporation WAT has reported second-quarter 2021 non-GAAP earnings of $2.60 per share, which surpassed the Zacks Consensus Estimate by 16.1%. Further, the bottom line improved 24% on a year-over-year basisand 13.5% sequentially.

Net sales of $681.6 million beat the Zacks Consensus Estimate of $614.5 million. The figure was up 31% from the year-ago quarter on a reported basis and 27% on a constant-currency basis. Further, it increased 12% from the previous quarter.

Top-line growth was driven by solid momentum across pharmaceutical, industrial, and governmental and academic end markets. Strong performance in Asia, the Americas and Europe contributed well. Strong performance delivered by the Waters and TA segments was a positive.

A favorable demand environment remained a major positive.

Favorable foreign currency fluctuations contributed 4% to sales growth in the reported quarter.

Waters Corporation Price, Consensus and EPS Surprise

Waters Corporation Price, Consensus and EPS Surprise
Waters Corporation Price, Consensus and EPS Surprise

Waters Corporation price-consensus-eps-surprise-chart | Waters Corporation Quote

Top Line in Detail

The company’s net sales figure can be categorized in four ways:

By Operating Segment: It operates in two organized segments — Waters and TA.

The Waters segment (89.1% of net sales) generated $607.3 million of sales, up 30% from the year-ago quarter. Sales in the TA segment were $74.3 million (10.9% of net sales), which reflected year-over-year growth of 37%.

By Products & Services: The division comprises three segments — Instruments, Services and Chemistry.

Instruments sales (46.1% of sales) were $314.5 million, up 43% on a year-over-year basis.

Service sales (35.3% of the sales) were $240.7 million, increasing 17% year over year.

Chemistry sales (18.6% of the sales) were $126.5 million, up 33% from the year-ago quarter.

Moreover, service and chemistry segmentstogether generated recurring revenues of $367.1 million, up 22% from the year-ago quarter.

By Markets: The company serves three end markets — Pharmaceutical, Industrial, and Governmental & Academic.

The Pharmaceutical market (61% of net sales) generated sales of $416.7 million, which increased 34% on a year-over-year basis.

The Industrial market’s (30% of sales) sales were $202.6 million, up 33% from the year-ago quarter.

Governmental & Academic (9% of sales) generated $62.4 million of sales. The figure improved 10% year over year.

By Geography: The company’s operating regions include Asia, the Americas and Europe.

Asia (39.6% of net sales) generated $269.9 million of sales, up 30% on a year-over-year basis.

The Americas (33% of sales) generated $224.9 million of sales, increasing 29% year over year. Notably, sales in the United States increased 26% year over year.

Europe (27.4% of sales) generated $186.8 million of sales, up 36% from the prior-year quarter.

Operating Details

In the second quarter, non-GAAP selling and administrative expenses were $157.6 million, reflecting an increase of 41.1% from the year-ago quarter. As a percentage of net sales, the figure expanded160 basis points (bps) year over year.

Research and development spendingwas $44.9 million, indicating a rise of 44.3% from the year-ago reported figure. As a percentage of net sales, the figure expanded70 bps year over year.

Adjusted operating margin was 29.2%, which contracted 230 basis points (bps) year over year.

Balance Sheet & Cash Flow

As of Jul 3, 2021, cash, cash equivalents and investments were $663.6 million, lower than $809.8 million as of Apr 3, 2021.

Account receivables stood at $543.1 million at the end of the second quarter, down from $550.7 million at the end of the last reported quarter.

Waters generated cash from operation of $143.04 million in the reported quarter, down from $218.4 million in the prior quarter.

The company recorded a free cash flow of $155 million in the second quarter.

Guidance

For third-quarter 2021, Waters expects non-GAAP earnings of$2.25-$2.35.per share. The Zacks Consensus Estimate for earnings is pegged at $2.24.

The company anticipates net sales growth of7-9% on a constant-currency basis. The Zacks Consensus Estimate for sales is pegged at $633.1 million.

For 2021, Waters anticipates non-GAAP earnings of $10.50-$10.70 per share. The Zacks Consensus Estimate for 2021 earnings is pegged at $10.04 per share.

The company expects 2021 net sales growth of 13-15% on a constant-currency basis. The Zacks Consensus Estimate for the same is pegged at $2.66 billion.

Zacks Rank & Stocks to Consider

Waters currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Microchip Technology MCHP, Semtech Corporation SMTC and Agilent Technologies A, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth rates for Microchip, Semtech and Agilent are currently projected at 15.33%, 12.5% and 13%, respectively.


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