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Waters Corporation (WAT - Analyst Report) released its fourth-quarter 2011 earnings before the market opens today, reporting earnings per share from continuing operations of $1.52, slightly above the Zacks Consensus Estimate of $1.50. Earnings in the quarter increased from $1.36 in the fourth quarter of 2010.

For 2011, earnings per share from continuing operations came in at $4.68, below the Zacks Consensus Estimate of $4.75 and above the prior-year earnings of $4.06.

Revenue

On the top line, Waters reported total revenue of $521 million for the fourth quarter, up 8% year over year. Foreign currency was neutral to sales. The company achieved double-digit revenue growth in 2011, with its revenue for the year increasing by 13% to $1.85 billion.

Income

Operating income for the quarter amounted to $164.9 million compared with $120.5 million in the fourth quarter of 2010. The company incurred total SG&A expense of approximately $126.2 million in the quarter versus $120.5 million in the year-ago quarter. R&D expense was approximately $23.7 million in the quarter versus $22.9 million in the prior-year quarter.

Balance Sheet

Cash flow generation was quite impressive during the quarter, with its cash, cash equivalents and short-term investments reaching approximately $1.28 billion at the end of 2011 compared with $946.4 million at the end of 2010. Long-term debt was $700.0 million and shareowner’s equity was $1.23 billion at the end of the year.

Our Analysis

The company continues to see considerable stability in its end markets and continued momentum in the acceptance of new products. The company continues to introduce new products. However, the analytical instrument and systems market is highly competitive. Major competitors of Waters are Agilent Technologies Inc. (A - Analyst Report), Life Technologies Corporation and Thermo Fisher Scientific Inc. (TMO - Analyst Report).

Waters Corporation, an analytical instrument manufacturer, designs, manufactures, sells and services, through its Waters Division, high performance liquid chromatography, ultra performance liquid chromatography (LC) and mass spectrometry (MS) instrument systems and support products, including chromatography columns, other consumable products and comprehensive post-warranty service plans.

We currently maintain our Neutral rating on Waters, with a Zacks #3 Rank (short-term Hold recommendation) over the next one-to-three months.

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