NEW YORK (GenomeWeb News) – Shares of Waters dropped sharply today after the firm reported fourth quarter profits that fell short of analysts' expectations.
The Milford, Mass.-based manufacturer of mass spectrometry and chromatography equipment posted net income of $98.9 million, or $.96 per share, for the quarter, which fell short of analysts’ consensus estimates of $1.06 per share. The firm cited a “higher than expected tax rate for 2007 and weaker sales in Japan” for the shortfall. For last year’s fourth quarter, Waters had posted net income of $79.9 million, or $.78 per share.
Although shares of many companies trading in the US fell amid continuing fears of a recession and market declines around the globe earlier today, the Dow Jones Industrial Average bounced back during the day from trading down 465 points this morning to being down 116 points this afternoon. Waters' shares, however, did not benefit from that rebound.
Investors fled the firm's shares, and by mid-afternoon Waters' stock was trading down 19.4 percent at $59.05, a level not seen since last August when it was trading at 52-week lows. Even before today's sell-off, investors began unloading shares last week, as Waters' stock fell from a closing price of $80.77 on Jan. 15 to finish last week at $73.23.
The firm reported fourth-quarter revenues of $437 million, a 13 percent increase over sales of $386.9 million in the comparable quarter last year, while its R&D spending rose 6.7 percent in the quarter to $20.8 million from $19.5 million year over year.
As has been the case over recent quarters, Waters Chairman, President and CEO Doug Berthiaume cited "continued rapid uptake of our Acquity UPLC systems and significant placements of Synapt HDMS instruments" as primary drivers of the firm's revenue growth.
Assuaging concerns about a potential drop in spending by pharmaceutical companies, a market trend that hit Waters' revenues hard a couple of years ago, Berthiaume noted during a conference call this morning that the pharmaceutical market in Japan is weaker than other parts of the world. He said he did not expect the steep drop in revenues in Japan in the fourth quarter — 12 percent — to continue, but the firm does not foresee double-digit growth for that market in the near future either.
For full-year 2007, Waters generated revenues of $1.5 billion, a 15 percent gain on revenues of $1.3 billion in fiscal 2006. The firm’s net earnings rose 20.7 percent year over year to $268.1 million, or $2.62 per share, from $222.2 million, or $2.13 per share.
Its R&D spending increased 4.1 percent for the year to $80.6 million from $77.3 million.
Waters finished 2007 with $693 million in cash and cash equivalents.
Company officials predicted first quarter sales growth of 14 percent and full-year 2008 sales growth of 10 percent to 12 percent.
Berthiaume said that Waters is "looking at improving our costs on our Acquity products. We have some engineering cost reductions that we’re working on that will improve the margins on that product by a few percentage points or more as we go across the year,” he said.
Berthiaume also expects the firm to benefit from an increase in environmental and food testing across the globe, and in particular the US, over the coming years.
“Overall, there’s still no reason to believe … given the developing countries, the developed countries, and the regulatory spending, that that doesn’t support a growth industry,” he said.
CFO John Ornell noted during the call that the firm would have new offerings at the upcoming Pittcon and American Society for Mass Spectrometry conferences, which he said would help instrument sales growth in the second half of the year.
In advance of the fourth-quarter results being released, Waters announced yesterday the launch of its Synapt MS system, a next-generation quadrupole orthogonal acceleration, time-of-flight mass spectrometry platform.