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Waters (WAT) Down 5.5% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Waters (WAT - Free Report) . Shares have lost about 5.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Waters due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Waters' Q4 Earnings & Revenues Beat Estimates
Waters has reported fourth-quarter 2020 non-GAAP earnings of $3.65 per share, which surpassed the Zacks Consensus Estimate by 27.2%. Further, the bottom line improved 68.9% sequentially and 14% on a year-over-year basis.
Net sales of $786.7 million beat the Zacks Consensus Estimate of $711.1 million. The top line was up 32.5% from the prior quarter. Further, the figure was up 10% from the year-ago quarter on a reported basis and 7% on a constant-currency basis.
Top-line growth was driven by strong performance in Asia, the Americas and Europe. Further, solid momentum across pharmaceutical and industrial end-markets contributed well. Additionally, the improved performance delivered by the Waters segment was a positive.
Moreover, favorable foreign currency fluctuations contributed 3% to sales growth in the reported quarter.
Although uncertainties related to the ongoing coronavirus pandemic remain headwinds for the company in the near term, solid commercial execution and efforts toward product development and innovation remain positives. Moreover, Waters’ new product pipelines remain tailwinds.
Top Line in Detail
The company’s net sales figure can be categorized in four ways:
By Operating Segment: It operates in two organized segments — Waters and TA.
The Waters segment (89.5% of net sales) generated $703.7 million of sales, up 11% from the year-ago quarter. Sales in the TA segment were $82.9 million (10.5% of net sales), which reflected year-over-year growth of 1%.
By Products & Services: This division comprises three segments — Instruments, Services and Chemistry.
Instruments sales (50.9% of sales) were $400.4 million, up6% on a year-over-year basis.
Service sales (32.4% of the sales) were $254.7 million, increasing 12% year over year.
Chemistry sales (16.7% of the sales) were $131.6 million, up 17% from the year-ago quarter.
Moreover, service and chemistry sections together generated recurring revenues of $386.2 million, up 14% from the year-ago quarter.
By Markets: The company serves three end markets — Pharmaceutical, Industrial, and Governmental & Academic.
The Pharmaceutical market (58% of net sales) generated sales of $460.4 million, which increased 17% on a year-over-year basis.
The Industrial market’s (30% of sales) sales were $233.2 million, up 8% from the year-ago quarter.
Governmental & Academic (12% of sales) generated $93.1million of sales. The figure declined 13% year over year.
By Geography: This company’s operating regions include Asia, the Americas and Europe.
Asia (37.6% of net sales) generated $295.7 million of sales, up 13% on a year-over-year basis.
The Americas (32% of sales) generated $251.4 million of sales, increasing 3% year over year. Notably, sales in the United States increased 4% year over year.
Europe (30.4% of sales) generated $239.5 million of sales, up 15% from the prior-year quarter.
Operating Details
In the fourth quarter, non-GAAP selling and administrative expenses were $150.9 million, reflecting an increase of 8.3% from the year-ago quarter. As a percentage of net sales, the figure contracted 30 basis points (bps) year over year.
Research and development spending was $39.7 million, indicating a rise of 6.9% from the year-ago reported figure. As a percentage of net sales, the figure contracted 20 bps year over year.
Adjusted operating margin was 35%, which contracted 140 basis points (bps) year over year.
Balance Sheet & Cash Flow
As of Dec 31, 2020, cash, cash equivalents and investments were $443.1 million, higher than $397.1 million as of Sep 26, 2020.
Further, accounts receivables stood at $573.3 million at the end of the fourth quarter, which was up from $494.4 million at the end of the last reported quarter.
Waters generated cash from operation of $267.5 million in the fourth quarter, up from $172.6 million in the prior quarter.
Further, it recorded free cash flow of $240 million in the reported quarter.
Guidance
For first-quarter 2021, Waters expects non-GAAP earnings of $1.50-$1.60 per share.
The company anticipates net sales growth between 10% and 13% on a reported basis.
For 2021, Waters anticipates non-GAAP earnings of $9.32-$9.57 per share.
Further, the company expects 2021 net sales growth of 6-10% on a reported basis.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -5.53% due to these changes.
VGM Scores
At this time, Waters has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Waters has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Waters (WAT) Down 5.5% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Waters (WAT - Free Report) . Shares have lost about 5.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Waters due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Waters' Q4 Earnings & Revenues Beat Estimates
Waters has reported fourth-quarter 2020 non-GAAP earnings of $3.65 per share, which surpassed the Zacks Consensus Estimate by 27.2%. Further, the bottom line improved 68.9% sequentially and 14% on a year-over-year basis.
Net sales of $786.7 million beat the Zacks Consensus Estimate of $711.1 million. The top line was up 32.5% from the prior quarter. Further, the figure was up 10% from the year-ago quarter on a reported basis and 7% on a constant-currency basis.
Top-line growth was driven by strong performance in Asia, the Americas and Europe. Further, solid momentum across pharmaceutical and industrial end-markets contributed well. Additionally, the improved performance delivered by the Waters segment was a positive.
Moreover, favorable foreign currency fluctuations contributed 3% to sales growth in the reported quarter.
Although uncertainties related to the ongoing coronavirus pandemic remain headwinds for the company in the near term, solid commercial execution and efforts toward product development and innovation remain positives. Moreover, Waters’ new product pipelines remain tailwinds.
Top Line in Detail
The company’s net sales figure can be categorized in four ways:
By Operating Segment: It operates in two organized segments — Waters and TA.
The Waters segment (89.5% of net sales) generated $703.7 million of sales, up 11% from the year-ago quarter. Sales in the TA segment were $82.9 million (10.5% of net sales), which reflected year-over-year growth of 1%.
By Products & Services: This division comprises three segments — Instruments, Services and Chemistry.
Instruments sales (50.9% of sales) were $400.4 million, up6% on a year-over-year basis.
Service sales (32.4% of the sales) were $254.7 million, increasing 12% year over year.
Chemistry sales (16.7% of the sales) were $131.6 million, up 17% from the year-ago quarter.
Moreover, service and chemistry sections together generated recurring revenues of $386.2 million, up 14% from the year-ago quarter.
By Markets: The company serves three end markets — Pharmaceutical, Industrial, and Governmental & Academic.
The Pharmaceutical market (58% of net sales) generated sales of $460.4 million, which increased 17% on a year-over-year basis.
The Industrial market’s (30% of sales) sales were $233.2 million, up 8% from the year-ago quarter.
Governmental & Academic (12% of sales) generated $93.1million of sales. The figure declined 13% year over year.
By Geography: This company’s operating regions include Asia, the Americas and Europe.
Asia (37.6% of net sales) generated $295.7 million of sales, up 13% on a year-over-year basis.
The Americas (32% of sales) generated $251.4 million of sales, increasing 3% year over year. Notably, sales in the United States increased 4% year over year.
Europe (30.4% of sales) generated $239.5 million of sales, up 15% from the prior-year quarter.
Operating Details
In the fourth quarter, non-GAAP selling and administrative expenses were $150.9 million, reflecting an increase of 8.3% from the year-ago quarter. As a percentage of net sales, the figure contracted 30 basis points (bps) year over year.
Research and development spending was $39.7 million, indicating a rise of 6.9% from the year-ago reported figure. As a percentage of net sales, the figure contracted 20 bps year over year.
Adjusted operating margin was 35%, which contracted 140 basis points (bps) year over year.
Balance Sheet & Cash Flow
As of Dec 31, 2020, cash, cash equivalents and investments were $443.1 million, higher than $397.1 million as of Sep 26, 2020.
Further, accounts receivables stood at $573.3 million at the end of the fourth quarter, which was up from $494.4 million at the end of the last reported quarter.
Waters generated cash from operation of $267.5 million in the fourth quarter, up from $172.6 million in the prior quarter.
Further, it recorded free cash flow of $240 million in the reported quarter.
Guidance
For first-quarter 2021, Waters expects non-GAAP earnings of $1.50-$1.60 per share.
The company anticipates net sales growth between 10% and 13% on a reported basis.
For 2021, Waters anticipates non-GAAP earnings of $9.32-$9.57 per share.
Further, the company expects 2021 net sales growth of 6-10% on a reported basis.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -5.53% due to these changes.
VGM Scores
At this time, Waters has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Waters has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.