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Waters (WAT) Down 6.1% 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 6.1% 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 Corporation reported fourth-quarter 2022 non-GAAP earnings of $3.84 per share, surpassing the Zacks Consensus Estimate by 2.7%. Further, the bottom line increased 4.6% on a year-over-year basis. The figure includes an 8% unfavorable foreign exchange headwind.
Net sales of $858.5 million beat the Zacks Consensus Estimate of $831.3 million. The figures rose 3% and 9% on a reported and constant-currency basis, respectively, from the comparable year-ago quarter’s readings.
Top line growth was driven by solid momentum across the industrial end market. Strong performances in the Americas contributed well. Strength across the Waters and TA segments was a positive.
Top Line in Detail
Waters’ net sales figure can be categorized in four ways:
By Operating Segment: WAT operates under two organized segments, namely Waters and TA.
The Waters segment (88% of net sales) generated sales worth $754.75 million, up 2% from the year-ago quarter’s level. Sales in the TA segment were $103.76 million (12% of net sales), reflecting 10% year-over-year growth.
By Products & Services: The division comprises three segments, namely Instruments, Services and Chemistry.
Instruments sales (54% of sales) were $463.04 million, rising 5% on a year-over-year basis.
Service sales (30% of sales) were $255.7 million, decreasing 0.3% year over year.
Chemistry sales (16% of sales) were $139.74 million, growing 1% from the year-ago quarter’s level.
Moreover, the service and chemistry segments jointly generated recurring revenues of $395.5 million, increasing 0.1% from the year-ago quarter’s reported figure.
By Markets: Waters serves three end markets, such as Pharmaceutical, Industrial and Governmental & Academic.
The Pharmaceutical market (58% of net sales) generated sales of $492.76 million, which increased 0.2% on a year-over-year basis.
The Industrial market’s (31% of sales) sales were $267.9 million, up 8% from the year-ago quarter’s level.
Academic & Government (11% of sales) generated $97.8 million of the total sales. The figure increased 1% year over year.
By Geography: Waters’ operating regions include Asia, the Americas and Europe.
Asia (37% of net sales) generated $319.5 million in sales, down 1% on a year-over-year basis. Sales in China fell 6% from the prior-year quarter’s level.
The Americas (34% of net sales) generated $293.12 million in sales, increasing 8% year over year. Sales in the United States increased 11% year over year.
Europe (29% of net sales) generated $245.93 million in sales, up 1% from the prior-year quarter’s level.
Operating Details
In the fourth quarter, non-GAAP selling and administrative expenses were $172.9 million, up 2.1% from the year-ago quarter’s level. As a percentage of net sales, the figure expanded by 30 basis points (bps) on a year-over-year basis.
Research and development spending was $48.3 million, up 11.4% from the year-ago period’s reported figure. As a percentage of net sales, the figure expanded by 40 bps year over year.
The adjusted operating margin was 33.7%, which expanded by 110 bps year over year.
Balance Sheet & Cash Flow
As of Dec 31, 2022, cash, cash equivalents and investments were $481.4 million, up from $444.5 million as of Oct 1, 2022.
Accounts receivables stood at $722.9 million at the end of the fourth quarter, up from $600.9 million in the last reported quarter.
Waters generated cash from operations of $198.7 million in the reported quarter, up from $158.1 million in the prior quarter.
WAT recorded a free cash flow of $144.6 million in the fourth quarter.
Guidance
For first-quarter 2023, Waters expects non-GAAP earnings of $2.55-$2.65 per share, which includes a foreign exchange headwind of 6%.
Waters anticipates net sales growth of 4-6% on a constant-currency basis. WAT expects sales growth to decline 4% due to unfavorable foreign exchange fluctuations.
For 2023, Waters anticipates non-GAAP earnings in the band of $12.55-$12.75 per share. This includes a foreign exchange headwind of 3%.
Waters expects 2023 net sales growth of 5-6.5% on a constant-currency basis.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, Waters has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, 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 D. 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 #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Waters is part of the Zacks Instruments - Scientific industry. Over the past month, Bruker (BRKR - Free Report) , a stock from the same industry, has gained 0.4%. The company reported its results for the quarter ended December 2022 more than a month ago.
Bruker reported revenues of $708.4 million in the last reported quarter, representing a year-over-year change of +3.6%. EPS of $0.74 for the same period compares with $0.59 a year ago.
For the current quarter, Bruker is expected to post earnings of $0.55 per share, indicating a change of +12.2% from the year-ago quarter. The Zacks Consensus Estimate has changed -1.1% over the last 30 days.
Bruker has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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Waters (WAT) Down 6.1% 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 6.1% 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 Corporation reported fourth-quarter 2022 non-GAAP earnings of $3.84 per share, surpassing the Zacks Consensus Estimate by 2.7%. Further, the bottom line increased 4.6% on a year-over-year basis. The figure includes an 8% unfavorable foreign exchange headwind.
Net sales of $858.5 million beat the Zacks Consensus Estimate of $831.3 million. The figures rose 3% and 9% on a reported and constant-currency basis, respectively, from the comparable year-ago quarter’s readings.
Top line growth was driven by solid momentum across the industrial end market. Strong performances in the Americas contributed well. Strength across the Waters and TA segments was a positive.
Top Line in Detail
Waters’ net sales figure can be categorized in four ways:
By Operating Segment: WAT operates under two organized segments, namely Waters and TA.
The Waters segment (88% of net sales) generated sales worth $754.75 million, up 2% from the year-ago quarter’s level. Sales in the TA segment were $103.76 million (12% of net sales), reflecting 10% year-over-year growth.
By Products & Services: The division comprises three segments, namely Instruments, Services and Chemistry.
Instruments sales (54% of sales) were $463.04 million, rising 5% on a year-over-year basis.
Service sales (30% of sales) were $255.7 million, decreasing 0.3% year over year.
Chemistry sales (16% of sales) were $139.74 million, growing 1% from the year-ago quarter’s level.
Moreover, the service and chemistry segments jointly generated recurring revenues of $395.5 million, increasing 0.1% from the year-ago quarter’s reported figure.
By Markets: Waters serves three end markets, such as Pharmaceutical, Industrial and Governmental & Academic.
The Pharmaceutical market (58% of net sales) generated sales of $492.76 million, which increased 0.2% on a year-over-year basis.
The Industrial market’s (31% of sales) sales were $267.9 million, up 8% from the year-ago quarter’s level.
Academic & Government (11% of sales) generated $97.8 million of the total sales. The figure increased 1% year over year.
By Geography: Waters’ operating regions include Asia, the Americas and Europe.
Asia (37% of net sales) generated $319.5 million in sales, down 1% on a year-over-year basis. Sales in China fell 6% from the prior-year quarter’s level.
The Americas (34% of net sales) generated $293.12 million in sales, increasing 8% year over year. Sales in the United States increased 11% year over year.
Europe (29% of net sales) generated $245.93 million in sales, up 1% from the prior-year quarter’s level.
Operating Details
In the fourth quarter, non-GAAP selling and administrative expenses were $172.9 million, up 2.1% from the year-ago quarter’s level. As a percentage of net sales, the figure expanded by 30 basis points (bps) on a year-over-year basis.
Research and development spending was $48.3 million, up 11.4% from the year-ago period’s reported figure. As a percentage of net sales, the figure expanded by 40 bps year over year.
The adjusted operating margin was 33.7%, which expanded by 110 bps year over year.
Balance Sheet & Cash Flow
As of Dec 31, 2022, cash, cash equivalents and investments were $481.4 million, up from $444.5 million as of Oct 1, 2022.
Accounts receivables stood at $722.9 million at the end of the fourth quarter, up from $600.9 million in the last reported quarter.
Waters generated cash from operations of $198.7 million in the reported quarter, up from $158.1 million in the prior quarter.
WAT recorded a free cash flow of $144.6 million in the fourth quarter.
Guidance
For first-quarter 2023, Waters expects non-GAAP earnings of $2.55-$2.65 per share, which includes a foreign exchange headwind of 6%.
Waters anticipates net sales growth of 4-6% on a constant-currency basis. WAT expects sales growth to decline 4% due to unfavorable foreign exchange fluctuations.
For 2023, Waters anticipates non-GAAP earnings in the band of $12.55-$12.75 per share. This includes a foreign exchange headwind of 3%.
Waters expects 2023 net sales growth of 5-6.5% on a constant-currency basis.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, Waters has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, 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 D. 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 #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Waters is part of the Zacks Instruments - Scientific industry. Over the past month, Bruker (BRKR - Free Report) , a stock from the same industry, has gained 0.4%. The company reported its results for the quarter ended December 2022 more than a month ago.
Bruker reported revenues of $708.4 million in the last reported quarter, representing a year-over-year change of +3.6%. EPS of $0.74 for the same period compares with $0.59 a year ago.
For the current quarter, Bruker is expected to post earnings of $0.55 per share, indicating a change of +12.2% from the year-ago quarter. The Zacks Consensus Estimate has changed -1.1% over the last 30 days.
Bruker has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.