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Waters Posts Disappointing 1Q

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Waters Corporation (WAT - Free Report) released its first-quarter 2012 earnings before the market opened today, reporting earnings per share from continuing operations of $1.00, below the Zacks Consensus Estimate of $1.09. Earnings in the quarter decreased from $1.04 in the first quarter of 2011.

The top-line and bottom-line performance failed to meet the company's expectations.


On the top line, Waters reported total revenue of $428 million for the first quarter, down 2% year over year. Foreign currency translation had a negative impact of 2% on sales. The top-line result was affected by lower sales in the developing markets and declines in capital expense by many pharmaceutical firms.


Operating income for the quarter amounted to $110.2 million compared with $115.9 million in the first quarter of 2011. The company incurred total SG&A expense of approximately $117.1 million in the quarter, almost flat year-over-year. R&D expense was approximately $23.3 million in the quarter versus $22.3 million in the prior-year quarter.

Balance Sheet

Cash, cash equivalents and short-term investments reached approximately $1.35 billion at the end of the quarter compared with $1.28 billion at the end of 2011. Long-term debt was $700.0 million and shareowner’s equity was $1.29 billion at the end of first-quarter 2012.

Moving Ahead

The company believes its strong competitive position and strategic market initiatives will facilitate it to perform well as it moves ahead.

The company continues to see considerable stability in its end markets and continued momentum in the acceptance of new products. The company continues to introduce new products. However, the analytical instrument and systems market is highly competitive. Major competitors of Waters are Agilent Technologies Inc. (A - Free Report) , Life Technologies Corporation (LIFE - Free Report) and Thermo Fisher Scientific Inc. (TMO - Free Report) .

Waters Corporation, an analytical instrument manufacturer, designs, manufactures, sells and services, through its Waters Division, high performance liquid chromatography, ultra performance liquid chromatography (LC) and mass spectrometry (MS) instrument systems and support products, including chromatography columns, other consumable products and comprehensive post-warranty service plans.

We currently maintain our Neutral rating on Waters, with a Zacks #2 Rank (short-term Buy recommendation) over the next one-to-three months.

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