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The bottom-line figure fared even better in year-over-year comparison, reflecting decent growth of 10.6% from the prior-year quarter tally of $1.42. Decent top-line growth and disciplined expense management proved conducive to the bottom-line performance. Also, improved operational execution, backed by the company’s efficient business model, supplemented earnings growth.
Inside the Headlines
In the quarter, Waters Corp.’s net sales were up 5.2% year over year to $526.8 million. However, the top line missed the Zacks Consensus Estimate of $533 million.
The upside in the top line was driven by solid performance in the bio/pharmaceutical end-markets, up 13% on a year-over-year basis. Also, the industrial market achieved 2% growth in sales. However, a 15% decline in sales within the government and academic markets partially offset the otherwise strong performance.
Also, impressive contribution from the sales of key products across major geographies supplemented quarterly sales growth. In addition, Water Corp.’s recurring revenues and instrument system sales increased 8% and 3%, respectively, boosting top-line growth.
On a geographic basis, Asia emerged as the winner, with 13% rise in sales, in terms of constant currency, largely attributable to the robust demand from China. However, Europe and America experienced sales decline of 3% and 1% respectively, on a year-over-year basis. While weaker demand from Eastern Europe hurt the sales in the Europe, weaker governmental and academic demand adversely affected the top line in America.
Also, operating income in the quarter went up 11.7% year over year to $151.7 million.
Total selling and administrative expenses in the quarter was $123.9 million, down from $124.6 million in third-quarter 2015. Research and development expenses were $30.4 million, compared with $30.7 million incurred a year ago.
Waters Corp.’s cash, cash equivalents and investments amounted to approximately $2.7 billion, higher than $2.4 billion as of Dec 31, 2015. The company’s total liabilities at quarter end increased to about $2.3 billion from $2.2 billion as of Dec 31, 2015.
Our Take
Waters Corp.’s sturdy market presence in both the high-performance liquid chromatography and mass spectrometry markets, strength in regulated testing, and non-discretionary product demand are its staple growth drivers. Moreover, the company’s pharmaceuticals business has proved to be its strongest revenue driver. Accelerated drug approvals by the FDA and favorable funding environment bode well for the company, going forward. Also, the company’s robust product portfolio supplements its strength.
However, of late, vagaries in spending by the governmental and academic customers have been hurting the company’s top line. Also, Waters Corp.’s escalating debt levels and R&D expenditure may dent its financials.
Stocks to Consider
Waters Corp. currently holds a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space include Adobe Systems Incorporated (ADBE - Free Report) , Autodesk, Inc. (ADSK - Free Report) and Exa Corporation . Exa Corporation sports a Zacks Rank #1 (Strong Buy), while Adobe Systems and Autodesk carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Adobe Systems is a leading player in the computer software space. The company has a striking earnings surprise history over the trailing four quarters, having beaten estimates all through, for an average beat of 5.6%.
Autodesk is one of the world's leading design software and digital content companies for architectural design and land development, manufacturing, utilities, telecommunications, and media and entertainment. This company has posted earnings beat in each of the trailing four quarters. It boasts an average beat of 52.4%.
Exa Corporation develops, markets, sells, and supports software products, and provides professional services for simulation-driven design. The company has an excellent earnings surprise history, beating estimates in all of the trailing four quarters. It has an average beat of 52.4%.
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Waters Corp. (WAT) Q3 Earnings in Line, Revenues Up Y/Y
Waters Corporation’s (WAT - Free Report) third-quarter 2016 adjusted earnings came in at $1.57 per share, in line with the Zacks Consensus Estimate.
The bottom-line figure fared even better in year-over-year comparison, reflecting decent growth of 10.6% from the prior-year quarter tally of $1.42. Decent top-line growth and disciplined expense management proved conducive to the bottom-line performance. Also, improved operational execution, backed by the company’s efficient business model, supplemented earnings growth.
Inside the Headlines
In the quarter, Waters Corp.’s net sales were up 5.2% year over year to $526.8 million. However, the top line missed the Zacks Consensus Estimate of $533 million.
The upside in the top line was driven by solid performance in the bio/pharmaceutical end-markets, up 13% on a year-over-year basis. Also, the industrial market achieved 2% growth in sales. However, a 15% decline in sales within the government and academic markets partially offset the otherwise strong performance.
Also, impressive contribution from the sales of key products across major geographies supplemented quarterly sales growth. In addition, Water Corp.’s recurring revenues and instrument system sales increased 8% and 3%, respectively, boosting top-line growth.
On a geographic basis, Asia emerged as the winner, with 13% rise in sales, in terms of constant currency, largely attributable to the robust demand from China. However, Europe and America experienced sales decline of 3% and 1% respectively, on a year-over-year basis. While weaker demand from Eastern Europe hurt the sales in the Europe, weaker governmental and academic demand adversely affected the top line in America.
Also, operating income in the quarter went up 11.7% year over year to $151.7 million.
Total selling and administrative expenses in the quarter was $123.9 million, down from $124.6 million in third-quarter 2015. Research and development expenses were $30.4 million, compared with $30.7 million incurred a year ago.
WATERS CORP Price, Consensus and EPS Surprise
WATERS CORP Price, Consensus and EPS Surprise | WATERS CORP Quote
Liquidity
Waters Corp.’s cash, cash equivalents and investments amounted to approximately $2.7 billion, higher than $2.4 billion as of Dec 31, 2015. The company’s total liabilities at quarter end increased to about $2.3 billion from $2.2 billion as of Dec 31, 2015.
Our Take
Waters Corp.’s sturdy market presence in both the high-performance liquid chromatography and mass spectrometry markets, strength in regulated testing, and non-discretionary product demand are its staple growth drivers. Moreover, the company’s pharmaceuticals business has proved to be its strongest revenue driver. Accelerated drug approvals by the FDA and favorable funding environment bode well for the company, going forward. Also, the company’s robust product portfolio supplements its strength.
However, of late, vagaries in spending by the governmental and academic customers have been hurting the company’s top line. Also, Waters Corp.’s escalating debt levels and R&D expenditure may dent its financials.
Stocks to Consider
Waters Corp. currently holds a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space include Adobe Systems Incorporated (ADBE - Free Report) , Autodesk, Inc. (ADSK - Free Report) and Exa Corporation . Exa Corporation sports a Zacks Rank #1 (Strong Buy), while Adobe Systems and Autodesk carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Adobe Systems is a leading player in the computer software space. The company has a striking earnings surprise history over the trailing four quarters, having beaten estimates all through, for an average beat of 5.6%.
Autodesk is one of the world's leading design software and digital content companies for architectural design and land development, manufacturing, utilities, telecommunications, and media and entertainment. This company has posted earnings beat in each of the trailing four quarters. It boasts an average beat of 52.4%.
Exa Corporation develops, markets, sells, and supports software products, and provides professional services for simulation-driven design. The company has an excellent earnings surprise history, beating estimates in all of the trailing four quarters. It has an average beat of 52.4%.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>