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Waters (WAT) Q1 Earnings Beat Estimates, Revenues Rise Y/Y

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Waters Corporation (WAT - Free Report) has reported first-quarter 2021 non-GAAP earnings of $2.29 per share, which surpassed the Zacks Consensus Estimate by 45.9%. Further, the bottom line improved 99% on a year-over-year basis but declined 37.3% sequentially.

Net sales of $608.5 million beat the Zacks Consensus Estimate of $522.2 million. The figure was up 31% from the year-ago quarter on a reported basis and 72% on a constant-currency basis. However, it was down 22.6% from the previous quarter.

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 strong performance delivered by the Waters and TA segments was a positive.

Moreover, favorable foreign currency fluctuations contributed 4% to sales growth in the reported quarter.

Waters Corporation Price, Consensus and EPS Surprise

Waters Corporation Price, Consensus and EPS Surprise

Waters Corporation price-consensus-eps-surprise-chart | Waters Corporation Quote

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% of net sales) generated $541.9 million of sales, up 31% from the year-ago quarter. Sales in the TA segment were $66.7 million(11% of net sales), which reflected year-over-year growth of 31%.

By Products & Services: The division comprises three segments — Instruments, Services and Chemistry.

Instruments sales (43.2% of sales) were $263.05 million, up 49% on a year-over-year basis.

Service sales (37.2% of the sales) were $226.5 million, increasing 19% year over year.

Chemistry sales (19.6% of the sales) were $118.9million, up 22% from the year-ago quarter.

Moreover, service and chemistry segments together generated recurring revenues of $345.5 million, up 20% from the year-ago quarter.

By Markets: The company serves three end markets — Pharmaceutical, Industrial, and Governmental & Academic.

The Pharmaceutical market (59.2% of net sales) generated sales of $360.15 million, which increased 32% on a year-over-year basis.

The Industrial market’s (30.1% of sales) sales were $183.3 million, up 28% from the year-ago quarter.

Governmental & Academic (10.7% of sales) generated $65.1million of sales. The figure improved 33% year over year.

By Geography: The company’s operating regions include Asia, the Americas and Europe.

Asia (38% of net sales) generated $229.5 million of sales, up 44% on a year-over-year basis.

The Americas (32% of sales) generated $197.4 million of sales, increasing 15% year over year. Notably, sales in the United States increased 4% year over year.

Europe (30% of sales) generated $181.6 million of sales, up 36% from the prior-year quarter.

Operating Details

In the first quarter, non-GAAP selling and administrative expenses were $142.3million, reflecting an increase of 11.9% from the year-ago quarter. As a percentage of net sales, the figure contracted 400 basis points (bps) year over year.

Research and development spendingwas $38.1 million, indicating a rise of 8.9% from the year-ago reported figure. As a percentage of net sales, the figure contracted 120 bps year over year.

Adjusted operating margin was 28.6%, which expanded880 basis points (bps) year over year.

Balance Sheet & Cash Flow

As of Apr 3, 2021, cash, cash equivalents and investments were $809.8 million, higher than $443.1 million as of Dec 31, 2020.

Further, accounts receivables stood at $550.7 million at the end of the first quarter, which was down from $573.3 million at the end of the last reported quarter.

Waters generated cash from operation of $218.4 million in the reported quarter, down from $267.5 million in the prior quarter.

Further, it recorded free cash flow of $193.4 million in the firstquarter.

Guidance

For second-quarter 2021, Waters expects non-GAAP earnings of$2.15-$2.25.per share. The Zacks Consensus Estimate for earnings is pegged at $2.05.

The company anticipates net sales growth between 14% and 16% on a constant-currency basis. The Zacks Consensus Estimate for sales is currently pegged at $592.5 million.

For 2021, Waters anticipates non-GAAP earnings of$9.85-$10.05 per share. The Zacks Consensus Estimate for 2021 earnings is pegged at $9.54 per share.

Further, the company expects 2021 net sales growth of 8-11% on a constant-currency basis. The Zacks Consensus Estimate for the same is pegged at $2.56 billion.

Zacks Rank & Other Stocks to Consider

Waters currently carries a Zacks Rank #2 (Buy). 

Some other top-ranked stocks in the broader technology sector worth consideration are Agilent Technologies (A - Free Report) , Microchip (MCHP - Free Report) and NVIDIA (NVDA - Free Report) . All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth rate of Agilent, Microchip and NVIDIA is pegged at 9%, 15.5% and 15.1%, respectively.

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