NEW YORK (GenomeWeb) – Waters reported before the opening of the market on Tuesday that its second quarter revenues rose 7 percent year over year, thanks in large part to strong recurring revenues and sales in China, and the company's TA instruments business.
For the three months ended June 30, the company posted Q2 revenues of $596.2 million, up from $558.3 million in Q2 2017, but falling short of the average Wall Street estimate of $598.0 million. Foreign currency translation boosted revenues by 2 percent, the company said.
In terms of end markets, government and academic sales were particularly strong, growing at 16 percent in Q2 to $74.2 million from $64.1 million in the prior-year quarter. Pharma sales grew 6 percent to $338.4 million from $319.7 million, and industrial sales grew 5 percent $183.7 million from $174.5 million in Q2 2017.
Waters' recurring revenues, which include its services and consumables businesses, grew 11 percent during the quarter to $306.5 million from $276.2 million, while instrument sales were up 3 percent to $289.7 million from $282.0 million in the prior-year quarter. On a conference call with analysts following the release of the earnings, Waters CFO Sherry Buck noted that combined LC and LC-MS instrument sales were flat during the quarter.
Geographically, sales were up 10 percent in both Asia and Europe, grew 1 percent in the Americas overall, and fell 2 percent in the US. Asia revenues grew to $236.9 million in Q2 from $215.7 million in Q2 2017 while European revenues grew to $161.2 million from $146.0 million. Revenues from the Americas grew to $198.1 million from $196.6 million year over year.
Poor performance in the Waters instruments business in Q1 led investors to speculate the company had lost mass spec market share. The decline in US sales and flat LC and LC-MS sales will likely leave this an open question, though Waters Chairman, President, and CEO Christopher O'Connell noted on the conference call that he expects stronger performance in the second half of the year.
"We had a slow start to the year in mass spec," he said. "Things definitely picked up in the second quarter. Not to where we want it to be yet but moving in the right direction."
Calling mass spec "a huge priority for the company," O'Connell said Waters is developing "what we believe [are] ground-breaking technologies in high-resolution mass spectrometry that we will give more visibility to as we roll into 2019."
O'Connell also cited the company's acquisition of Prosolia's desorption electrospray ionization (DESI) mass spec technology, which continues Waters investment in direct ionization mass spec approaches. The acquisition was announced yesterday.
Such techniques "allow for simplified, direct sample analysis under ambient conditions without any required sample preparation," O'Connell said, adding that the company sees mass spec imaging as a major opportunity for the technology.
Waters' Q2 net income grew to $155.7 million, or $1.98 per share, from $131.8 million, or $1.63 per share, a year ago. On a non-GAAP basis, the company reported EPS of $1.95, beating the average analyst estimate of $1.92.
Water's R&D spending in Q2 was up 8 percent to $35.6 million from $32.9 million a year ago, while SG&A costs rose 5 percent to $136.6 million from $130.1 million.
The company ended the quarter with $2.25 billion in cash, cash equivalents, and investments.
For the third quarter of 2018 the company anticipates sales growth in the 4 percent to 6 percent range, with currency translation reducing this by around 1 percent to 2 percent. It predicted non-GAAP EPS in the range of $1.85 to $1.95. For full-year 2018 Waters predicted non-GAAP EPS in the range of $8.05 to $8.20, which is a revision from the company's previous guidance of $8.10 to $8.30. Buck said on the call that this revision is due to a change in the expected impacts of currency translation, which the company now expects to be neutral but previously predicted would have a roughly 1 percent positive impact.
Analysts are expecting Q3 EPS of $1.95 and 2018 EPS of $8.18.
In morning trading on the New York Stock Exchange, shares of Waters were up a little over 1 percent to $199.19.