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Why Is Waters Corporation (WAT) Down 4.7% Since its Last Earnings Report?
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It has been about a month since the last earnings report for Waters Corporation (WAT - Free Report) . Shares have lost about 4.7% in that time frame, outperforming the market.
Will the recent negative trend continue leading up to its next earnings release, or is WAT due for a breakout? Before we dive into how investors and analysts have reacted 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 Beat on Broad-Based Sales Growth
Waters Corp. has a brilliant earnings beat streak, spanning 13 quarters of positive earnings surprises, which the company broke just once as it reported in-line earnings once last year.In fourth-quarter 2017, Waters Corp. continued its impressive trend, as the company’s adjusted earnings of $2.51 per share trumped the Zacks Consensus Estimate of $2.44 by 2.9%.
The bottom-line figure fared even better in year-over-year comparison, reflecting striking growth of 13.6% from the prior-year quarter tally of $2.21. Remarkable broad-based top-line expansion, along with spectacular growth in Europe, aided the earnings beat.Solid operational execution, backed by the company’s efficient business model, also lent strength to the results. Further, a decline in interest expenses aided quarterly profits.
On a GAAP basis, Waters Corp. reported a loss of $4.44 per share compared with earnings of $2.15 in fourth-quarter 2016. The company’s GAAP profitability was adversely affected by a huge, one-time expense of income tax of about $550 million.
For the full year, the company reported adjusted earnings of $7.49 per share, reflecting impressive growth of 14% over the previous year.
Inside the Headlines
In the reported quarter, Waters Corp.’s net sales grew 9% year over year to $687 million and also came ahead of the Zacks Consensus Estimate of $671 million. For the full year, revenues grew 7% year over year to $2.3 billion.
The upside in the quarter’s top line came on the back of robust performance in the bio/pharmaceutical end markets (up 11% year over year), and the government and academic market (up 17% year over year). The momentum was further backed by 3% growth in the industrial end markets.
Also, impressive contribution from sale of key products across major geographies supplemented quarterly sales growth. In addition, Water Corp.’s recurring revenues and instrument system sales climbed 12% and 7%, respectively, driving top-line growth.
In terms of geographies, Waters Corp. witnessed strong sales in Europe, United States and Asia, which posted 16%, 9% and 7% growth, respectively. Overall sales in the Americas rebounded from the earlier weakness, and rose 6% year over year.
Total selling and administrative expenses in the quarter came in at $148.8 million, up from $130.2 million incurred in fourth-quarter 2016. Research and development outlay for the quarter was $35.1 million compared with $32.8 million incurred a year ago.
Despite the rise in these expenses, operating income in the quarter advanced 10.5% year over year to $230.2 million.
Liquidity
Waters Corp.’s cash, cash equivalents and investments at the quarter end amounted to $3.4 billion, higher than the $2.81 billion recorded as on Dec 31, 2016. The company’s total liabilities at quarter end increased to about $3.1 billion from $2.4 billion as on Dec 31, 2016.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. There have been two revisions lower for the current quarter. While looking back an additional 30 days, we can see even more downside. There have been six moves down in the last two months.
At this time, WAT has a strong Growth Score of A, though it is lagging a bit on the momentum front with a B. 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than momentum investors.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, WAT has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.
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Why Is Waters Corporation (WAT) Down 4.7% Since its Last Earnings Report?
It has been about a month since the last earnings report for Waters Corporation (WAT - Free Report) . Shares have lost about 4.7% in that time frame, outperforming the market.
Will the recent negative trend continue leading up to its next earnings release, or is WAT due for a breakout? Before we dive into how investors and analysts have reacted 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 Beat on Broad-Based Sales Growth
Waters Corp. has a brilliant earnings beat streak, spanning 13 quarters of positive earnings surprises, which the company broke just once as it reported in-line earnings once last year.In fourth-quarter 2017, Waters Corp. continued its impressive trend, as the company’s adjusted earnings of $2.51 per share trumped the Zacks Consensus Estimate of $2.44 by 2.9%.
The bottom-line figure fared even better in year-over-year comparison, reflecting striking growth of 13.6% from the prior-year quarter tally of $2.21. Remarkable broad-based top-line expansion, along with spectacular growth in Europe, aided the earnings beat.Solid operational execution, backed by the company’s efficient business model, also lent strength to the results. Further, a decline in interest expenses aided quarterly profits.
On a GAAP basis, Waters Corp. reported a loss of $4.44 per share compared with earnings of $2.15 in fourth-quarter 2016. The company’s GAAP profitability was adversely affected by a huge, one-time expense of income tax of about $550 million.
For the full year, the company reported adjusted earnings of $7.49 per share, reflecting impressive growth of 14% over the previous year.
Inside the Headlines
In the reported quarter, Waters Corp.’s net sales grew 9% year over year to $687 million and also came ahead of the Zacks Consensus Estimate of $671 million. For the full year, revenues grew 7% year over year to $2.3 billion.
The upside in the quarter’s top line came on the back of robust performance in the bio/pharmaceutical end markets (up 11% year over year), and the government and academic market (up 17% year over year). The momentum was further backed by 3% growth in the industrial end markets.
Also, impressive contribution from sale of key products across major geographies supplemented quarterly sales growth. In addition, Water Corp.’s recurring revenues and instrument system sales climbed 12% and 7%, respectively, driving top-line growth.
In terms of geographies, Waters Corp. witnessed strong sales in Europe, United States and Asia, which posted 16%, 9% and 7% growth, respectively. Overall sales in the Americas rebounded from the earlier weakness, and rose 6% year over year.
Total selling and administrative expenses in the quarter came in at $148.8 million, up from $130.2 million incurred in fourth-quarter 2016. Research and development outlay for the quarter was $35.1 million compared with $32.8 million incurred a year ago.
Despite the rise in these expenses, operating income in the quarter advanced 10.5% year over year to $230.2 million.
Liquidity
Waters Corp.’s cash, cash equivalents and investments at the quarter end amounted to $3.4 billion, higher than the $2.81 billion recorded as on Dec 31, 2016. The company’s total liabilities at quarter end increased to about $3.1 billion from $2.4 billion as on Dec 31, 2016.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. There have been two revisions lower for the current quarter. While looking back an additional 30 days, we can see even more downside. There have been six moves down in the last two months.
Waters Corporation Price and Consensus
Waters Corporation Price and Consensus | Waters Corporation Quote
VGM Scores
At this time, WAT has a strong Growth Score of A, though it is lagging a bit on the momentum front with a B. 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than momentum investors.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, WAT has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.