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Waters (WAT) to Report Q3 Earnings: What's in the Cards?

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Waters Corporation (WAT - Free Report) is set to report third-quarter 2018 results on Oct 23.

The company outpaced the Zacks Consensus Estimate in the trailing four quarters, delivering an average positive earnings surprise of 2.18%.

In the last reported quarter, Waters’ earnings of $1.95 per share,recording a positive surprise of 1.56%. Further, the figure grew 11% on a year-over-year basis but declined 22.6% sequentially.

Net sales increased 7% year over year and12.3% sequentially to $596.22 million. However, the figure missed the Zacks Consensus Estimate of $598.04 million.

Improved end-market results especially in the Governmental & Academic market drove year-over-year growth. Further, the company’s strong momentum across Asia and Europe contributed well to top-line growth. Moreover, robust performance of Waters and TA product line were also positive.

For the third quarter, Waters expects non-GAAP earnings in the range of $1.58-$1.95 per share. The Zacks Consensus Estimate for earnings is pegged at $1.90 per share.

Let’s see how things are shaping up for this quarter.

Robust Products to Aid Growth

Waters well performing products in the analytical instruments category are likely to benefit the to-be reported quarter results. Moreover, the company’s product pipelines that are categorized into two divisions– Waters and TA, are expected to aid its performance in the various end-markets.

For the third quarter, the Zacks Consensus Estimate for sales in Waters segment is pegged at $524 million. Application kits and UPLC columns expected to continue to driving growth in this segment.

Further, the Zacks Consensus Estimate for sales in TA segmentis peggedat $64 million. We believe the company’s robust thermal analyzers in the discovery space will drive top-line growth within this segment.

Consequently, the Zacks Consensus Estimate for sales in Pharmaceutical, Industrial and Governmental & Academic (G&A) end-markets is pegged at $336 million, $173 million and $81 million, respectively.

When compared with the actuals, sales in G&A market in which company’s performance is improving, are up 7.6% from the year-ago quarter. Further, the figures in the industrial and pharmaceutical market are up 2.8% and 4.4%, respectively, year over year.

Waters Corporation Price and EPS Surprise

Waters Corporation Price and EPS Surprise | Waters Corporation Quote

Factors to Consider

Although Waters’ strong product lines and end market performance remain the key catalysts of its top-line growth, sluggishness in the industrial and pharmaceutical markets is a concern and might impact the upcoming quarterly results.

Softness in the food market and weak demand from the environment customers remain overhangs and might affect the company’s performance in the industrial market.

Further, slower growth in pharmaceutical quality control space and sluggish biomedical research market are likely to be hindrances in the to-be reported quarter.

However, growth in the research activities in academics areas such as pharmaceutical discovery, material sciences, clinical diagnostics that are more research oriented will continue to drive the company’s sales in G&A market.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Waters currently has a Zacks Rank #3 and an Earnings ESP of -0.21%, making surprise prediction difficult.

Stocks That Warrant a Look

Here are few stocks worth considering as our model shows that it has the right combination of elements to deliver an earnings beat in the upcoming releases.

Advanced Energy Industries (AEIS - Free Report) has an Earnings ESP of +2.70% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

AMETEK (AME - Free Report) has an Earnings ESP of +0.71% and a Zacks Rank #2.

Vishay Intertechnology (VSH - Free Report) has an Earnings ESP of +0.62% and Zacks Rank #2.

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