NEW YORK – Waters reported before the opening of the market on Tuesday that its second quarter revenues were flat year over year, though the company noted that it expects new product introductions and improving end markets will drive growth in the second half of 2019.
For the three months ended June 29, the company posted Q2 revenues of $599.2 million, up less than 1 percent from $596.2 million in Q2 2018, and short of the average Wall Street estimate of $601.4 million. Foreign currency translation depressed revenues by 2 percent, the company said.
In terms of end markets, pharma sales were up 3 percent to $350.2 million from $338.4 million in the year ago quarter. Government and academic sales were $72.9 million, down 2 percent from $74.2 million in Q2 2018. Industrial sales fell 4 percent to $176.1 million from $183.7 million the year prior.
Waters' recurring revenues, which include its services and consumables businesses, grew 2 percent during the quarter to $312.2 million from $306.5 million, while instrument sales were down 1 percent to $287.0 million from $289.7 million in the prior-year quarter.
Geographically, sales were up 3 percent in Asia, 5 percent in the Americas overall, and fell 2 percent in Europe. Asia revenues grew to $238.8 million in Q2 from $236.9 million in Q2 2018 while revenues from the Americas grew to $206.8 million from $198.1 million. European revenues fell to $153.6 million from $161.2 million year over year.
Waters Chairman, President, and CEO Christopher O'Connell noted on a conference call this morning that the growth in Asia was driven by the company's China business, which grew 3 percent in Q2 driven by strong demand among its pharmaceutical customers, though this strength was offset somewhat by weak growth in Chinese academic and government markets.
Pharma sales were also "solid" in Europe, O'Connell said, though this was countered by a decline in industrial and applied markets.
In the US, pharma sales were driven by "strong growth in large molecule applications," he said, noting that the company's largest US "pharmaceutical customers increased spending across both LC and LC-MS instruments."
Waters' mass spec business "grew modestly" in Q2, O'Connell said, "driven by strong pharmaceutical demand, particularly for the QDa and high-resolution mass spec systems."
He added that the company's QTOF mass spec instruments sold particularly well in the quarter, which he said he believed set the stage for sales of its new cyclic IMS and Synapt XS instruments, which will launch in the second half of the year.
Waters also announced this week the launch of two new tandem quadrupole systems, the Xevo TQ-S Micro and Xevo TQ-S Cronos, which are targeted at users doing routine quantitation.
Waters' Q2 net income was $144.4 million, or $2.08 per share, compared to $155.7 million, or $1.98 per share, a year ago. On a non-GAAP basis, the company reported EPS of $2.14, beating the analysts' average estimate of $2.11.
The company repurchased 2.7 million shares of common stock for $577 million in the second quarter and plans to repurchase an additional $600 million in Q3, targeting a total of $2.5 billion in repurchases for full-year 2019, Waters CFO Sherry Buck said on the call.
Water's R&D spending in Q2 was up 2 percent to $36.5 million from $35.6 million a year ago, while SG&A costs fell 3 percent to $133.2 million from $136.6 million.
The company ended the quarter with $675.8 million in cash, cash equivalents, and investments.
For the third quarter of 2019, the company anticipates sales growth in the 2 percent to 4 percent range, with currency translation reducing this by around 1 percent. It predicted non-GAAP EPS in the range of $2.05 to $2.15. For full-year 2019 Waters predicted non-GAAP EPS in the range of $8.95 to $9.10, which is a revision from the company's previous guidance of $9.05 to $9.25.
Analysts, on average, are expecting Q3 EPS of $2.21 and 2019 EPS of $9.08.
O'Connell said the lowered guidance reflected Waters' weaker than expected performance in the first half of 2019 but added that he anticipated an uptick in the second half of the year driven by solid pharma demand and stabilization of the company's Chinese markets.
In morning trading on the New York Stock Exchange, shares of Waters were down 7 percent to $211.93.