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Waters Posts 2 Percent Revenue Growth for Q3

NEW YORK (GenomeWeb News) – Waters today reported that its revenues in the third quarter were up 2 percent year over year, with weak pharma sales countering improved government and academic demand.

The company posted revenues of $457.3 million, up from $450 million in Q3 2012, but short of the average Wall Street estimate of $463.5 million. Foreign currency translation lowered sales growth by 2 percent, Waters said.

On a conference call following release of the results, Waters Chairman, President, and CEO Douglas Berthiaume observed that "flat growth in pharmaceutical sales significantly offset a strong quarterly performance from chemical analysis and non-profit end markets."

This dynamic varied somewhat with geography, however, as in the US the company saw a double-digit decline in government and academic spending, while pharma sales were up in the low-single digits.

In Europe, meanwhile, "government and academic spending was fairly robust and grew at a high-single-digit rate," Berthiuame said, "while [the company's] pharmaceutical end-market business decelerated from the first-half pace."

Sales grew in China at a mid-single-digit rate, which, he noted, lagged the mid-teens growth rate in orders that Waters has seen in China over the first three quarters of 2013. The Chinese market's "underlying demand for research systems, especially mass spectrometry-based [systems], is strong," Berthiuame said, "and should be reflected in an accelerating shipment volume as we close out 2013."

The company's recurring revenues grew at a mid-single-digit rate in the quarter, Berthiuame said.

Its mass spec instrument sales, meanwhile, have grown at a high-single-digit rate through the first three quarters of the year, he noted.

In particular, he said, Waters has seen "strong demand in the quarter for high performance Q-TOF technology systems including Xevo and Synapt [mass spec] platform instruments." The new Synapt G2-Si, which the company released at the American Society for Mass Spectrometry annual meeting in June, "has been well received for large biomolecule applications including proteomic and lipidomic workflows," he said.

Sales of tandem quadrupole mass spec systems for clinical and applied markets also "grew nicely in the quarter," Berthiuame said. However, he noted, demand for high-end tandem systems slowed "due to generally weaker pharma spending and delays associated with evaluation of new competitor products." Both Thermo Fisher Scientific and Bruker released new high-end tandem platforms at ASMS.

Chromatography instrumentation sales growth improved from the second quarter, "but remain below our expectations," Berthiuame said, adding that "capital spending delays, primarily from large pharmaceutical customers, continue to adversely impact new [chromatography] system growth in classical small molecule research applications."

The Milford, Mass-based company posted a profit of $98 million, or $1.14 per share, during the quarter, compared to a profit of $99.1 million, or $1.12 per share, for Q3 2012. On a non-GAAP basis, Waters had EPS of $1.19, below the average analyst estimate of $1.23.

The firm's R&D spending was down less than 1 percent year over year to $23.6 million from $23.8 million a year ago, while SG&A costs rose 5 percent to $120.6 million from $115.3 million.

The company ended the quarter with $1.70 billion in cash, cash equivalents, and investments.

For full-year 2013 the company said it expects non-GAAP EPS to be in the range of $4.92 to $4.97. This is $.03 below the guidance it provided after release of its Q2 earnings in July and $.33 below its guidance from January.

For Q4 2013 the company expects sales growth of around 4 percent and non-GAAP EPS in the range of $1.58 to $1.63.

In Tuesday morning trading on the New York Stock Exchange, shares of Waters were down 3 percent at $102.99.

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