Waters (WAT) Q2 Earnings & Sales Surpass Estimates, Rise Y/Y
Waters Corporation WAT has reported second-quarter 2022 non-GAAP earnings of $2.75 per share, which surpassed the Zacks Consensus Estimate by 4.6%. Further, the bottom line improved 6% on a year-over-year basis.
Net sales of $714.3 million beat the Zacks Consensus Estimate of $705.6 million. The figure rose 5% and 10% from the year-ago quarter on a reported and constant-currency basis, respectively.
Top-line growth was driven by a solid momentum across pharmaceutical, industrial, and government and academic end markets. Strong performances in Asia and the Americas contributed well.
Waters Corporation Price, Consensus and EPS Surprise
Waters Corporation price-consensus-eps-surprise-chart | Waters Corporation Quote
Top Line in Detail
Waters’ net sales figure can be categorized in four ways:
By Operating Segment: WAT operates under two organized segments, Waters and TA.
The Waters segment (89% of net sales) generated $635.1 million of sales, up 5% from the year-ago quarter. Sales in the TA segment were $79.2 million (11% of net sales), reflecting 7% year-over-year growth.
By Products & Services: The division comprises three segments — Instruments, Services and Chemistry.
Instruments sales (47% of sales) were $337.7 million, rising 7% on a year-over-year basis.
Service sales (34% of the sales) were $244.7 million, increasing 2% year over year.
Chemistry sales (19% of the sales) were $131.9 million, growing 4% from the year-ago quarter.
Moreover, the service and chemistry segments together generated recurring revenues of $376.6 million, increasing 3% from the year-ago quarter.
By Markets: Waters serves three end markets — Pharmaceutical, Industrial, and Governmental & Academic.
The Pharmaceutical market (61% of net sales) generated sales of $437.2 million, which increased 5% on a year-over-year basis.
The Industrial market’s (29% of sales) sales were $208.5 million, up 3% from the year-ago quarter.
Academic & Government (10% of sales) generated $68.6 million of the total sales. The figure increased 10% year over year.
By Geography: Waters’ operating regions include Asia, the Americas and Europe.
Asia (39% of net sales) generated $278.01 million of sales, up 3% on a year-over-year basis. Sales in China grew 9% from the prior-year quarter.
The Americas (36% of net sales) generated $257.3 million of sales, increasing 14% year over year. Sales in the United States increased 28% year over year.
Europe (25% of net sales) generated $179.04 million of sales, down 4% from the prior-year quarter’s level.
Operating Details
In the second quarter, non-GAAP selling and administrative expenses were $160.05 million, reflecting an increase of 1.6% from the year-ago quarter. As a percentage of net sales, the figure contracted 70 basis points (bps) year over year.
Research and development spending was $44.01 million, down 2.1% from the year-ago reported figure. As a percentage of net sales, the figure contracted 40 bps year over year.
The adjusted operating margin was 28.4%, which contracted 80 bps year over year.
Balance Sheet & Cash Flow
As of Jul 2, 2022, cash, cash equivalents and investments were $419.8 million, lower than $503.1 million as of Apr 2, 2022.
Account receivables stood at $639.4 million at the end of the second quarter, up from $607.3 million in the last reported quarter.
Waters generated cash from operation of $56.9 million in the reported quarter, down from $197.9 million in the prior quarter.
The company recorded a free cash flow of $67.3 million in the second quarter.
Guidance
For third-quarter 2022, Waters expects non-GAAP earnings of $2.50-$2.60 per share, which includes a foreign exchange headwind of 10%. The Zacks Consensus Estimate for earnings is pegged at $2.69 per share.
Waters anticipates net sales growth of 8-10% on a constant-currency basis. The company expects sales growth to decline six percentage points due to unfavorable foreign exchange fluctuations. The Zacks Consensus Estimate for sales is pegged at $683.4 million.
For 2022, Waters has revised the guidance for non-GAAP earnings upward from $11.90-$12.10 per share to $11.95-$12.05. This includes a foreign exchange headwind of 9%. The Zacks Consensus Estimate for 2022 earnings is pegged at $12.00.
Waters has also increased its guidance for sales growth. It expects 2022 net sales growth of 9.5-10.5% on a constant-currency basis. Sales growth is likely to decline five percentage points due to currency translation. The Zacks Consensus Estimate for sales is pegged at $2.94 billion. Previously, the company had anticipated net sales growth of 7.5-9% on a constant-currency basis.
Zacks Rank & Stocks to Consider
Waters currently carries a Zacks Rank #3 (Hold).
Investors interested in the broader Zacks Computer & Technology sector can consider some better-ranked stocks like MACOM Technology Solutions MTSI, Keysight Technologies KEYS and Asure Software ASUR, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
MACOM has lost 26% in the year-to-date period. The long-term earnings growth rate for MTSI is currently projected at 16.2%.
Keysight Technologies has lost 20.9% in the year-to-date period. KEYS’ long-term earnings growth rate is currently projected at 9.1%.
Asure Software has lost 29.6% in the year-to-date period. The long-term earnings growth rate for ASUR is currently projected at 14%.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Waters Corporation (WAT) : Free Stock Analysis Report
Asure Software Inc (ASUR) : Free Stock Analysis Report
MACOM Technology Solutions Holdings, Inc. (MTSI) : Free Stock Analysis Report
Keysight Technologies Inc. (KEYS) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research