Waters Corporation WAT has reported third-quarter 2020 non-GAAP earnings of $2.16 per share, which surpassed the Zacks Consensus Estimate by 13.1%. Further, the bottom line improved 2.9% sequentially and1.4% on a year-over-year basis.
Net sales of $593.8 million beat the Zacks Consensus Estimate of $547.1 million. The top line was up 14.2% from the prior quarter. Further, the figure was up 3% from the year-ago quarter on a reported basis and 2% on a constant currency basis.
Top-line growth was driven by strong performance in the Americas and Europe. Further, solid momentum across pharmaceutical and industrial end-markets contributed well. Additionally, the improved performance delivered by the Waters segment was a positive.
Moreover, favorable foreign currency fluctuations contributed 1% to sales growth inthe reported quarter.
Although uncertainties related to the ongoing coronavirus pandemic remain headwinds for the company in the near term, solid commercial execution and efforts toward product development and innovation remain positives. Moreover, Waters’ new product pipelines remain tailwinds.
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 (89.8% of net sales) generated $533.5 million of sales, up 4% from the year-ago quarter. Sales in the TA segment were $60.3 million (10.2% of net sales), which reflected a year-over-year decline of 7%.
By Products & Services: This division comprises three segments — Instruments, Services and Chemistry.
Instruments sales (45% of sales) were $268.1 million, down 1% on a year-over-year basis.
Service sales (37% of the sales) were $217.5 million, increasing 5% year over year.
Chemistry sales (18% of the sales) were $108.2million, up 8% from the year-ago quarter.
Moreover, service and chemistry sections together generated recurring revenues of $325.7 million, up6% from the year-ago quarter.
By Markets: The company serves three end markets — Pharmaceutical, Industrial, and Governmental & Academic.
The Pharmaceutical market (57.8% of net sales) generated sales of $343 million, which increased 5% on a year-over-year basis.
The Industrial market’s (30.2% of sales) sales were $179.1 million, up5% from the year-ago quarter.
Governmental & Academic (12% of sales) generated $71.7 million of sales. The figure declined 8% year over year.
By Geography: This company’s operating regions include Asia, the Americas and Europe.
Asia (39.8% of net sales) generated $236.2 million of sales, down 1% on a year-over-year basis.Nevertheless, sales in China rose4% during the third quarter.
The Americas (33.6% of sales) generated $199.4 million of sales, increasing 2% year over year. Notably, sales in the United States increased 5% year over year.
Europe (26.6% of sales) generated $158.2 million of sales, up 11% from the prior-year quarter.
In the third quarter, non-GAAP selling and administrative expenses were $128.7million, reflecting an increase of 3.4% from the year-ago quarter.
Research and development spending was $34.9 million, indicating a rise of 1.8% from the year-ago reported figure.
Adjusted operating margin was 28.3%, which contracted 240 basis points (bps) year over year.
Balance Sheet & Cash Flow
As of Sep 26, 2020, cash, cash equivalents and investments came in at $397.1 million, higher than $355.8 million as of Jun 27, 2020.
Further, accounts receivables stood at $494.4 million at the end of the third quarter, which was down from $496.3 million at the end of the last reported quarter.
Waters generated cash from operation of $172.6 million in the third quarter, down from $198.8 million in the prior quarter.
Further, it recorded free cash flow of $189.9 million in the reported quarter.
Zacks Rank &Stocks to Consider
Waters currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader technology sector are Qorvo QRVO, CDW Corporation CDW, and Avnet AVT. All three stocks flaunt a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Avnet, CDW and Qorvo are set to report quarterly earnings on Oct 28, Nov 2, and Nov 4, respectively.
Long-term earnings growth rate of Avnet, CDW and Qorvo is pegged at 17.88%, 13.1% and 12.35%, respectively.
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