Waters Corp. Falls 4.3% Despite Excellent Q3 Results


Shares of Massachusetts-based Waters Corp. (WAT) lost 4.3% on Tuesday to close at $348.88, even though the company reported excellent financial results for the third quarter of 2021.

The company offers specialty measurement instruments and solutions involving liquid chromatography, mass spectrometry, supercritical fluid chromatography, laboratory informatics, rheometry, microcalorimetry and thermal analysis.

Adjusted earnings per share (EPS) increased 23% year-over-year to $2.66, beating the Street’s estimate of $2.37. Sales grew 11% to $659 million, surpassing analysts’ expectations of $657.24 million.

During the quarter, Instruments sales rose 10% year-over-year to $296 million and Total Recurring sales surged 11% to $363 million. (See Insiders’ Hot Stocks on TipRanks)

Management Comments

Commenting on the results, the President and CEO of Waters, Udit Batra, said, “We are very pleased with our third-quarter results led by strong growth in our pharmaceutical and industrial end markets. We saw balanced double-digit growth in our instruments and recurring revenue portfolios which gives us confidence in the durability of our commercial momentum.”

Guidance

Notably, the company has provided guidance for the fourth quarter and full year. It expects sales growth in the range of 5% to 7% and 15% to 16%, respectively.

Furthermore, it anticipates adjusted EPS in the range of $3.40 to $3.50 in the fourth quarter and between $10.94 and $11.04 in 2021.

Wall Street’s Take

Following the release of the third-quarter results, Cowen & Co. analyst Daniel Brennan maintained a Hold rating on the stock and raised the price target to $375 from $360 (7.5% upside potential).

Brennan said, “WAT’s stock traded down ~(4%) after a good 3Q, given investors had grown accustomed to bigger quarterly beats coming out of COVID (3Q organic upside was more muted). The 4Q guide and initial ’22 commentary reflect management confidence in continued MSD organic and ~LDD EPS growth.”

Stifel Nicolaus analyst Daniel Arias, too, reiterated a Hold rating on the stock and increased the price target from $321 to $328 (6% downside potential).

Arias said, “Waters put up another solid quarter with notable growth in Pharma and Industrial offset by weakness in Academic & Government. Slippage of a $12 million shipment to China to 4Q21 was an additional headwind in the quarter, but management does not believe this is indicative of any systemic supply chain issues.”

Analyst Recommendation

Overall, the stock has a Hold consensus rating based on 6 Holds. The average Waters price target of $363 implies 4.1% upside potential. Shares have gained 60.7% over the past year.

Bloggers’ Opinion

TipRanks data shows that financial blogger opinions are 66% Bullish on the stock, compared to the sector average of 70%.

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