Waters (WAT) Q4 Earnings & Sales Beat Estimates, Fall Y/Y
Waters Corporation WAT reported fourth-quarter 2023 non-GAAP earnings of $3.62 per share, beating the Zacks Consensus Estimate by 1.7%. However, the bottom line declined 5.7% on a year-over-year basis.
Net sales of $819.5 million topped the Zacks Consensus Estimate of $813.7 million. The figure fell 4.5% on a reported basis and 8% at constant currency from the year-ago quarter’s readings.
Softness in the pharmaceutical, industrial, and government and academic markets was a major concern. Also, weakening momentum in Asia remained a headwind.
Sluggishness in the Waters and TA segments was a negative.
Nevertheless, growing momentum across the Americas and Europe was a positive.
Waters Corporation Price, Consensus and EPS Surprise
Waters Corporation price-consensus-eps-surprise-chart | Waters Corporation Quote
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.
The Waters segment (87% of net sales) generated sales worth $716.93 million, down 5% year over year. Sales in the TA segment were $102.54 million (13%), reflecting 1% year-over-year decline.
By Products & Services: The division comprises three segments, namely Instruments, Services and Chemistry.
Instruments sales (47%) were $397.2 million, declining 14% on a year-over-year basis.
Services registered sales (35%) worth $278.9 million, climbing 9% year over year.
Chemistry sales (18%) totaled $143.4 million, growing 3% year over year.
Moreover, the Services and Chemistry segments jointly generated recurring revenues of $422.3 million, up 7% year over year.
By Markets: Waters serves three end markets, such as Pharmaceutical, Industrial, and Governmental & Academic.
The Pharmaceutical market (56%) generated sales of $463.7 million, which decreased 6% on a year-over-year basis.
The Industrial market’s (33%) sales were $260.25 million, down 3% year over year.
Governmental & Academic market (11%) generated $95.53 million of total sales. The figure plunged 2% year over year.
By Geography: Waters’ operating regions include Asia, the Americas and Europe.
Asia (33%) generated $261.9 million in sales, down 18% on a year-over-year basis.
Sales in the Americas (36%) generated $303.7 million, growing 4% year over year. The United States registered 12% year-over-year improvement in sales.
Europe (31%) generated $253.8 million in sales, up 3% year over year.
Operating Details
In the fourth quarter, non-GAAP selling and administrative expenses were $172.95 million, down 0.03% year over year. As a percentage of net sales, the figure expanded 100 basis points (bps) on a year-over-year basis.
Research and development spending of $44.4 million decreased 8.1% year over year. As a percentage of net sales, the figure contracted 20 bps year over year.
Adjusted operating margin was 34.9%, which expanded 120 bps year over year.
Balance Sheet & Cash Flow
As of Dec 31, 2023, cash, cash equivalents and investments were $395.97 million, up from $337.3 million as of Sep 30, 2023.
Waters generated cash from operations of $230.12 million in the reported quarter, up from $157.8 million in the prior quarter.
WAT recorded a free cash flow of $191.65 million in the fourth quarter.
Guidance
For first-quarter 2024, Waters expects non-GAAP earnings of $2.05-$2.15 per share. The Zacks Consensus Estimate is pegged at $2.49.
Management anticipates organic sales to decline 11-9% on a constant-currency basis. WAT projects sales to decline by 1% due to unfavorable foreign exchange fluctuations. Wyatt transaction is estimated to increase sales by 3.5%.
On a reported basis, total sales are predicted to decline 8.5-6.5%. The Zacks Consensus Estimate is pegged at $694.16 million.
For 2024, Waters anticipates non-GAAP earnings of $11.75-$12.05 per share. This includes a foreign exchange headwind of 1%. The Zacks Consensus Estimate is pegged at $12.00.
Waters projects 2024 organic sales growth of -0.5-1.5% on a constant-currency basis. Wyatt transaction is expected to increase sales by 1.3%.
On a reported basis, total sales are suggested to grow 0-2%. The Zacks Consensus Estimate is pegged at $3.02 billion.
Zacks Rank & Key Picks
Currently, Waters has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are Arista Networks ANET, Badger Meter BMI and AMETEK AME. Arista Networks sports a Zacks Rank #1 (Strong Buy), and Badger Meter and AMETEK carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arista Networks shares have surged 110.5% in the past year. The long-term earnings growth rate for ANET is projected at 19.77%.
Badger Meter shares have gained 15.7% in the past year. The long-term earnings growth rate for BMI is anticipated at 12.27%.
AMETEK shares have risen 13.5% in the past year. The long-term earnings growth rate for AME is pegged at 9.58%.
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