October 23, 2018 | 3:32 PM by Jay Kunstman | jkunstman@jaguaranalytics.com

Behind The Numbers – Waters Corp (WAT)

As a specialty measurement company, Waters designs, manufactures, sells, and services high and ultra-performance liquid chromatography technology, as well as mass spectrometry (MS) technology, and also thermal analysis.

This morning, the company would report its Q3 earnings:

-EPS of $1.92 vs $1.90 estimate – Beat
-Revenue of $578M vs $587.79M estimate – Miss
-Net Sales increased 3% (ex-currency)
-Pharmaceutical Market Sales increased 2%
-Industrial Market Sales increased 2%
-Governmental & Academic Market Sales increased 8%
-Recurring Revenue increased 6%
-Sees Q4 EPS of $2.55 – $2.65 vs $2.69 estimate – Miss

CEO Christopher O’Connell would state that for TA Instruments, while growth in this product line was up 6% YTD, TA had a soft sales quarter due to the timing of certain shipments to US, European and Chinese customers. That said, underlying TA order growth in Q3 was encouraging and was in line with year-to-date order trends, despite the slower-than-expected sales in the quarter. We continue to be excited about the near and long-term prospects of the TA product line, which is in the early innings of a major new product cycle in thermal analysis.

In terms of geographic performance, the CEO would comment that their European growth was challenged in the quarter by the pressure within their pharmaceutical end market. Though we saw an improvement in big pharma in the US during the quarter, spending among top pharma customers in Europe remains tempered with uncertain dynamics heading into the end of 2018. On the positive side, sales to our pharmaceutical customers in the US picked up meaningfully during the quarter. We are encouraged with the improved spending that we are seeing by our largest pharma customers in the US and our Q4 expectations assume a continuation of that trend.”

Product Development

Thus far, in 2018, the company has launched the ACQUITY Arc Bio system, the ACQUITY UPLC Plus series, the Xevo TQ-GC, the DART QDa with LiveID, the RenataDX screening system and numerous chemistry products, as well as additions to their TA product lines, such as the DMA 850. Managemtne would highlight that while these new products have seen successful launches, “we expect to realize greater revenue contribution from them in 2019 and beyond.”

Finally, looking ahead to 2019, Waters is enthusiastic about a number of additional launches that will begin a major new product cycle, highlighted by the first steps of their Bio Taft program. This biopharmaceutical LCMS system is the industry’s first integrated benchtop mass spectrometry-based platform for routine monitoring and release testing. This system delivers a sample to result streamlined workflow process that will enable routine operators to acquire reproducible, decision-supporting data that is more of a challenge to obtain using existing research grade mass spec systems.

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