Waters (WAT) Q3 Earnings Beat Estimates, Revenues Rise Y/Y
Waters Corporation WAT reported third-quarter 2023 non-GAAP earnings of $2.84 per share, beating the Zacks Consensus Estimate by 10.94%. The bottom line increased 7.6% on a year-over-year basis.
Net sales of $711.7 million lagged the Zacks Consensus Estimate of $725 million. The figure rose 0.4% on a reported basis but declined 4% at constant currency year over year.
Waters benefited from the Wyatt acquisition, which contributed 4% to quarterly sales.
Top Line in Detail
Waters’ net sales figure can be categorized in four ways:
By Operating Segment: WAT operates under two organized segments, namely Waters and TA.
Waters Corporation Price, Consensus and EPS Surprise
Waters Corporation price-consensus-eps-surprise-chart | Waters Corporation Quote
The Waters segment (88.4% of net sales) generated sales worth $629.3 million, up 1% year over year. TA segment sales (11.6% of net sales) were $82.3 million, down 3.3% year over year.
By Products & Services: The division comprises three segments, namely Instruments, Services and Chemistry.
Instruments sales were $319.4 million, down 5% on a year-over-year basis.
Services sales were $263.6 million, which climbed 8% year over year. Chemistry sales totaled $128.7 million, flat year over year.
On a combined basis, the Services and Chemistry segments generated recurring revenues of $392.3 million, up 6% year over year.
By Markets: Waters serves three end markets, including Pharmaceutical, Industrial and Governmental & Academic.
The Pharmaceutical market generated sales of $421.5 million, up 4% on a year-over-year basis. Academic & Government generated $80.7 million, up 3% year over year.
The Industrial market’s sales were $209.4 million, down 6% year over year.
By Geography: Waters’ operating regions include Asia, the Americas and Europe.
Asia generated $238.2 million in sales, down 15% on a year-over-year basis. The company reported disappointing sales in China.
Sales in the Americas generated $275.5 million, up 7% year over year. The United States registered a 12% improvement year over year in sales.
Europe generated $198 million in sales, up 15% year over year.
Operating Details
In the third quarter, non-GAAP selling and administrative expenses were $155.7 million, down 3.6% year over year. As a percentage of net sales, the figure declined 90 basis points (bps) on a year-over-year basis.
Research and development spending of $40 million declined 7.8% year over year. As a percentage of net sales, the figure declined 50 bps.
Adjusted operating margin was 31.5%, which expanded 380 bps year over year.
Balance Sheet & Cash Flow
As of Sep 30, 2023, cash, cash equivalents and investments were $337.3 million, down from $330.6 million as of Jul 1, 2023.
Waters generated cash from operations of $157.8 million in the reported quarter, significantly up from $18.1 million in the prior quarter.
WAT recorded a free cash flow of $122.7 million in the third quarter.
Guidance
For fourth-quarter 2023, Waters expects non-GAAP earnings in the range of $3.52-$3.62 per share.
Management anticipates net sales to decline 8-5% on a constant-currency basis. WAT projects sales to decline roughly 1.5% due to unfavorable foreign exchange fluctuations. Also, the Wyatt transaction is estimated to increase sales by 4%.
On a reported basis, total sales are predicted to decline in the 6-3% band.
For 2023, Waters anticipates non-GAAP earnings in the range of $11.65-$11.75 per share. This includes a foreign exchange headwind of 3.5%.
Waters projects 2023 net sales to decline between 2% and 1% on a constant-currency basis. The Wyatt transaction is expected to increase sales by 2.5%.
On a reported basis, total sales are suggested to be between flat to down 1%.
Zacks Rank & Stocks to Consider
Currently, Waters has a Zacks Rank #4 (Sell).
Waters shares have lost 20.2% year to date, underperforming the Zacks Medical sector’s decrease of 10.2%.
Aveanna Healthcare AVAH, GoodRx GDRX and Exscientia EXAI are some better-ranked stocks that investors can consider in the broader Zacks Medical sector, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Aveanna shares have gained 103.8% year to date. AVAH is set to report its third-quarter 2023 results on Nov 9.
GoodRx shares have returned 14.2% year to date. GDRX is set to report its third-quarter 2023 results on Nov 9.
Exscientia shares have declined 37.6% year to date. EXAI is set to report its third-quarter 2023 results on Nov 9.
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