Yahoo Finance Why Is Waters (WAT) Down 5.1% Since Last Earnings Report?
A month has gone by since the last earnings report for Waters (WAT). Shares have lost about 5.1% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Waters' Q1 Earnings & Sales Beat Estimates, Fall Y/Y
Waters has reported first-quarter 2024 non-GAAP earnings of $2.21 per share, beating the Zacks Consensus Estimate by 5.2%. However, the bottom line decreased 11.2% on a year-over-year basis.
Net sales of $636.84 million topped the Zacks Consensus Estimate of $634.35 million. The figure fell 7% on a reported basis and 9% at constant currency from the year-ago quarter’s readings.
Softness in the pharmaceutical, industrial, and government and academic markets was a major concern. The weakening momentum in Asia was another headwind.
Sluggishness in the Waters and TA segments was a negative.
Nevertheless, the growing momentum in Europe 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 $561.9 million, down 7% year over year. Sales in the TA segment were $74.9 million (12%), reflecting a 9% year-over-year decline.
By Products & Services: The division comprises three segments, namely Instruments, Services and Chemistry.
Instruments sales (37%) were $241.9 million, declining 20% on a year-over-year basis.
Services registered sales (41%) worth $260.7 million, climbing 5% year over year.
Chemistry sales (22%) totaled $134.2 million, growing 1% year over year.
Moreover, the Services and Chemistry segments jointly generated recurring revenues of $394.9 million, up 3% year over year.
By Markets: Waters serves three end markets, such as Pharmaceutical, Industrial, and Governmental & Academic.
The Pharmaceutical market (58%) generated sales of $374.2 million, which decreased 3% on a year-over-year basis.
The Industrial market’s (31%) sales were $195.3 million, down 7% year over year.
The Governmental & Academic market (11%) generated $67.3 million in sales, which plunged 25% year over year.
By Geography: Waters’ operating regions include Asia, the Americas and Europe.
Asia (33%) generated $207.6 million in sales, down 18% on a year-over-year basis.
Sales in the Americas (37%) generated $241.2 million, decreasing 2% year over year. The United States registered a 12% year-over-year improvement in sales.
Europe (30%) generated $188.1 million in sales, up 2% year over year.
Operating Details
In the first quarter, non-GAAP selling and administrative expenses were $160.5 million, down 7.8% year over year. As a percentage of net sales, the figure contracted 20 basis points (bps) on a year-over-year basis.
Research and development spending of $44.6 million increased 4.6% year over year. As a percentage of net sales, the figure expanded 80 bps year over year.
The adjusted operating margin was 27%, which expanded 20 bps year over year.
Balance Sheet & Cash Flow
As of Dec 31, 2023, cash, cash equivalents and investments were $338.2 million, down from $395.97 million as of Dec 31, 2023.
Waters generated cash from operations of $262.9 million in the reported quarter, up from $230.12 million in the prior quarter.
WAT recorded a free cash flow of $233.8 million in the first quarter.
Guidance
For second-quarter 2024, Waters expects non-GAAP earnings of $2.50-$2.60 per share.
Management anticipates organic sales to decline 6-4% on a constant-currency basis. WAT projects sales growth to dip 2% due to unfavorable foreign exchange fluctuations. Wyatt transaction is estimated to increase sales growth by 1.5%.
On a reported basis, total sales are predicted to decline 6.5-4.5%.
For 2024, Waters anticipates non-GAAP earnings of $11.75-$12.05 per share. This includes a foreign exchange headwind of 2%.
Waters projects 2024 organic sales growth between -0.5% and 1.5% on a constant-currency basis. Wyatt transaction is expected to increase sales growth by slightly more than 1%. WAT projects sales growth to be affected by less than 1% due to unfavorable foreign exchange fluctuations.
On a reported basis, total sales are suggested to grow 0-2%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -8.17% due to these changes.
VGM Scores
At this time, Waters has a great Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. 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 belongs to the Zacks Medical - Instruments industry. Another stock from the same industry, Glaukos (GKOS), has gained 7.3% over the past month. More than a month has passed since the company reported results for the quarter ended March 2024.
Glaukos reported revenues of $85.62 million in the last reported quarter, representing a year-over-year change of +15.9%. EPS of -$0.70 for the same period compares with -$0.59 a year ago.
For the current quarter, Glaukos is expected to post a loss of $0.52 per share, indicating a change of +5.5% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
Glaukos has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.
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