NEW YORK (GenomeWeb News) – Waters today reported revenues grew 14 percent year over year in the second quarter, but missed analysts' estimates on soft sales to government and academic customers.
For the three months ended July 2, the company posted $447.6 million in revenues, up from $391.1 million a year ago, but short of Wall Street's consensus estimate of $451.1 million.
Waters also fell short of Wall Street's earnings per share expectations as net income for the quarter came in at $100.1 million, or $1.07 per share. On an adjusted basis EPS was $1.08, below analysts' expectations of $1.14. The firm's profit for the prior year's second quarter was $84.9 million, or $.90 per share.
In a conference call following the release of the results, Waters President and CEO Douglas Berthiaume said that despite the increase in revenues, the company saw soft sales among its government and academic customers, while orders from pharmaceutical customers slowed as the quarter came to a close.
During the quarter, SG&A costs also spiked 17 percent to $125.4 million from $106.9 million a year ago as a result of expenses associated with new product launches, as well as the effects of currency exchange. Waters CFO John Ornell said during the conference call that while the company had expected currency effects to increase expenses by 5 percentage points, in actuality it lifted expenses by 6.5 percentage points.
He added that SG&A is expected to grow "about with sales" in the third quarter and slower than sales in the fourth quarter.
The firm's R&D spending rose 11 percent to $23.0 million from $20.8 million a year ago.
Ornell added in the conference call that the total 14 percent revenue growth during the quarter includes 6 percentage points from foreign currency translation.
By geography and before factoring in foreign currency exchange effects, US sales were up 2 percent year over year while Europe grew 6 percent. Sales in Japan increased 11 percent, and business in Asia outside of Japan rose 14 percent.
Recurring revenues, comprised of services and chromatography consumables, in the Waters division increased 9 percent year over year in constant currency, while instrument sales climbed 6 percent, Ornell said.
TA instrument sales increased 10 percent year over year
In the Waters instruments business, UPLC sales rose in the double digits "with H-Class now dominating Acquity sales," Berthiaume said. At the American Society for Mass Spectrometry annual meeting in June, the company launched the Acquity UPLC I-Class System, and the platform will begin shipping in the third quarter.
Liquid chromatography-mass spectrometry system growth was driven by tandem quadrupole placements, with the Xevo TQS "capturing more bioanalytical opportunities" and TQD-based systems "heavily devoted to food, environmental, and clinical new instrument sales," Berthiaume said.
Waters ended the second quarter with $1.12 billion in cash, cash equivalents, and short-term investments.
For the third quarter, Ornell said organic sales growth is expected to be 9 percent, and he gave EPS guidance of between $1.10 and $1.15 on a non-GAAP basis
For full-year 2011, Waters expects sales growth of about 10 percent before currency translation, resulting in EPS of between $4.80 and $4.90 on a non-GAAP basis, Ornell said.
In early morning trading today on the New York Stock Exchange, Waters' stock was down 9 percent at $88.45.