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Waters (WAT) to Report Q1 Earnings: What's in the Cards?

Zacks Equity Research

Waters Corporation WAT is set to report first-quarter 2019 results on Apr 23.

The company outpaced the Zacks Consensus Estimate in the trailing four quarters, delivering an average positive earnings surprise of 3.37%.

In the last reported quarter, Waters’ earnings of $2.87 per share, recording a positive surprise of 8.3%. Further, the figure improved 14.3% on a year-over-year basis and 49.5% sequentially.

Net sales surged 23.7% sequentially and 4.1% year over year to $715.02 million. Further, the figure outpaced the Zacks Consensus Estimate of $702.52 million.

The company’s robust TA product line drove year-over-year top-line growth. Further, Waters’ solid momentum in China and strong performance in the pharmaceutical market contributed well.

For the first quarter, Waters anticipates non-GAAP earnings in the range of $1.65-$1.75 per share. The Zacks Consensus Estimate for earnings is pegged at $1.73 per share.

Let’s see how things are shaping up prior to this announcement.

Waters Corporation Price and EPS Surprise

Waters Corporation Price and EPS Surprise | Waters Corporation Quote

Segmental Performance: A Key Catalyst

Waters well performing products in the analytical instrument category are likely to impact its segmental performance in the to-be reported quarter.

Waters segment is likely to benefit from the company’s strengthening mass spectrometry portfolio. Moreover, ongoing stabilization in high-resolution mass spectrometry offering remains a major positive. Further, well-performing liquid chromatography instruments are anticipated to continue driving sales within this segment. For the first quarter, the Zacks Consensus Estimate for sales in Waters segment is pegged at $483 million, suggesting an improvement of 2.5% from the year-ago reported figure.

Additionally, the company’s robust thermal analyzers are expected to aid TA segment’s growth. Further, its rheology and electro force product lines are also performing well which is likely to act as a tailwind. The Zacks Consensus Estimate for sales in TA segment is pegged at $61 million, indicating growth of 2.5% from the year-ago reported figure.

End-Market Strength to Aid Growth

Waters is riding on its well performing mass spectrometry portfolio in the Pharmaceutical market. Further, its growing momentum in the U.S. and Chinese pharma space are likely to aid its performance in this end market. The Zacks Consensus Estimate for sales in the market is pegged at $313 million, suggesting an improvement of 2.5% from the year-ago reported quarter.

Further, sales in the Industrial market are likely to be driven by strong TA product lines. Further, Waters’ solid momentum across the areas of Material Science and food and environmental are acting as catalysts. The Zacks Consensus Estimate for sales for this end-market is pegged at $168 million, indicating growth of 3.5% from the year-ago reported figure.

For sales in Governmental & Academic (G&A) market, the Zacks Consensus Estimate is projected at $63 million which is in line with the prior-year reported quarter. The company continues to gain traction in this market with its strength in pharmaceutical discovery field.

We believe all the above-mentioned growth factors are anticipated to drive the company’s result in the first quarter.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Waters currently has a Zacks Rank #3 and an Earnings ESP of +1.23%, making us reasonably confident of an earnings beat.

Stocks That Warrant a Look

Here are some other stocks which you may consider as our model shows that these too have the right combination of elements to post an earnings beat in their upcoming release:

Xilinx, Inc. XLNX has an Earnings ESP of +2.03% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Acacia Communications, Inc. ACIA has an Earnings ESP of +5.73% and a Zacks Rank #2.

Mettler-Toledo International, Inc. MTD has an Earnings ESP of +2.17% and a Zacks Rank #2.

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