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Waters Q1 Revenues Up 7 Percent

NEW YORK (GenomeWeb) – Waters reported today that its first quarter revenues rose 7 percent year over year, as the company saw solid demand among its pharma customers but a decline in sales of its mass spectrometry instruments.

Waters posted revenues of $530.7 million for the quarter compared to $498 million in Q1 2017, below the average Wall Street estimate of $535.3 million.

Currency translation increased sales growth by around 5 percent, the company said.

Waters also announced that its board has authorized a new share buyback program, under which the company can purchase $3.526 billion of its common stock over a three-year period.

On a conference call following the earnings release, Waters President and CEO Christopher O'Connell said the company's first quarter results were weaker than expected mainly due to underperformance of its mass spec business and a "soft market in India."

"The weak performance of the mass spec product line was attributable to an unusually sluggish start in biomedical research, particularly high-resolution mass spec in the omics area, combined with temporary disruption from territory realignment within our US mass spec sales team made as part of an ongoing growth initiative," O'Connell said. He noted that around three-quarters of the company's miss in revenue expectations was due to weakness in its mass spec business.

O'Connell said he believed the soft quarter was not a reflection of the company's competitive position in mass spec, but that "we just saw in the quarter a little more accentuated lumpiness, particularly in a couple of key end markets like biomedical research."

He added the company has completed the sales force realignment and has "begun to establish a strong order pipeline, giving us confidence in a mass spec reacceleration."

"We are not assuming an immediate bounce back, but we are certainly assuming an improvement," he said.

Waters branded instrument sales were down 4 percent in the quarter, with solid chromatography sales offset by the decline in the mass spec business. Recurring revenues grew 6 percent in the quarter.

Waters' pharma sales were up 3 percent in the quarter, with double-digit growth in China and mid-single-digit growth in the developed markets, O'Connell said. Sales grew by 7 percent in the company's governmental and academic business, with strong growth in China driven by food research applications, which was partially offset by weakness from biomedical research customers in the developed markets. Industrial sales were down 3 percent in the quarter, with the decline driven by a drop in mass spec sales to chemical, food, and environmental customers.

Looking at the company's sales geographically, Asia was flat in the first quarter with weakness in India offsetting high single-digit growth in China. Sales were up 4 percent in the Americas, up 5 percent in the US, and up 2 percent in Europe.

The Milford, Massachusetts-based company said Q1 net income rose to $112 million, or $1.40 per share, compared to $105.6 million, or $1.31 per share, a year ago. On a non-GAAP basis, Waters reported EPS of $1.59, beating analysts' average estimate of $1.55.

The firm's R&D spending rose 12 percent year over year to $34.5 million from $30.8 million a year ago, while SG&A costs fell less than 1 percent to $130.4 million from $130.7 million.

The company ended the quarter with $2.55 billion in cash, cash equivalents, and investments.

For full-year 2018, Waters said it anticipates sales growth of between 4 and 6 percent and earnings per share in the $8.10 to $8.30 range, up from its prior guidance of $8.00 to $8.25. Wall Street analysts, on average, are expecting EPS of $8.18 for the year.

In Tuesday morning trade on the New York Stock Exchange, shares of Waters were down 8 percent to $191.97.