Waters Corporation (WAT) released its second-quarter 2011 earnings before the market opened today, reporting earnings per share from continuing operation of $1.07, below the Zacks Consensus Estimate of $1.14. Earnings in the quarter increased from 90 cents in the second quarter of 2010.
Revenue
On the top line, WAT reported total revenue of $448 million for the first quarter, up 14% year over year. Foreign currency translation added 6% to the sales. The company benefited in the quarter from rapid acceptance by customers of new product offerings and due to good business in Asia.
Income
Operating income for the quarter amounted to $120.6 million compared with $105.6 million in the second quarter of 2010. The company incurred total SG&A expense of approximately $125.4 million in the quarter versus $106.9 million in the year-ago quarter.
Balance Sheet
Cash and cash equivalents and short-term investments were approximately $1.12 billion with long-term debt of $400.0 million and shareowner’s equity of $1.23 billion.
Our Analysis
Waters enjoys a solid footing in the chromatography instrument market, which we believe will be a prime benefactor for the company. A strong customer demand in mass spectrometry and HPLC will help the company to sustain a healthy performance in its organic sales growth over the next few years.
Further, a significant portion of Waters’ revenue is derived from recurring revenue sources, including consumables and services, which are expected to continue to increase over the longer term.
However, the analytical instrument and systems market is highly competitive. Major competitors of Waters are Agilent Technologies Inc. (A), Life Technologies Corporation (LIFE) and Thermo Fisher Scientific Inc. (TMO).
Waters competes in its markets primarily based on instrument performance, reliability, service, and to a lesser extent, price. Some competitors have instrument businesses that are generally more diversified, but are typically less focused on the company’s chosen markets. Some other competitors have greater financial and other resources compared to Waters.
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 #3 Rank (short-term Hold recommendation) over the next one-to-three months.
AGILENT TECH (A): Free Stock Analysis Report
LIFE TECHNOLOGS (LIFE): Free Stock Analysis Report
THERMO FISHER (TMO): Free Stock Analysis Report
WATERS CORP (WAT): Free Stock Analysis Report
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