What's In The Offing For Waters Corp (WAT) In Q4 Earnings?

Waters Corporation (NYSE:WAT) is scheduled to report fourth-quarter 2017 results before the opening bell on Jan 23.

Last quarter, the company’s adjusted earnings beat the Zacks Consensus Estimate of $1.74 by 1.7%. Overall, Waters Corp. outpaced estimates in the trailing four quarters, with an average positive surprise of 4.5%.

Let’s see how things are shaping up for this announcement.

Factors to Consider

Waters Corp.’s key strengths include leading positions in the pharmaceutical market, broad global customer base and an impressive lineup of products. Particularly, Global pharmaceuticals business, which is the company’s largest single market and has been a major profit churner for the Waters Division in the past few quarters. We believe stable demand from pharmaceutical business, modest recovery of industrial markets as well as growth in recurring revenues will benefit the fourth-quarter results.

Moreover, the company remains bullish on its Industrial business backed by increasing regulation around food safety and quality, strict conditions for food testing, along with environmental and fine chemical applications. Additionally, an increased demand for research intensive products, especially the company’s mass spectrometry solutions, is a positive for its business and is likely to bolster the fourth-quarter sales.

During the last reported quarter, the company benefited largely from both of its LC and LC/MS platforms. The company’s liquid chromatography benefited from the ACQUITY Arc System, while mass spectrometry grew impressively, driven by ACQUITY QDa and Xevo family of Tandem Quadrupole. We believe robust traction of ACQUITY and CORTECS line of products along with strength in end markets are likely to prove conductive to upcoming results.

However, the fact remains that rising R&D expenses and high interest expenses remain a burden, consequently eroding profitability for the upcoming results. A significant portion of the company’s revenues is generated from non-U.S. markets. This makes it vulnerable to fluctuations in exchange rates. We believe currency fluctuations to put pressure on top-line growth and margins for the quarter under review.

Further, the company grapples with stiff competition from several international instrument manufacturers as well as other companies in both domestic and foreign markets. The company’s key technologies like HPLC, UPLC, MS, LC-MS, thermal analysis, rheometry and calorimetry product lines are part of a highly competitive industry and are subject to rapid changes in technology.

Earnings Whispers

Our proven model does not conclusively show an earnings beat for Waters Corp. this time around. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Zacks ESP: Waters Corp. has an Earnings ESP of -0.32%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company carries a Zacks Rank #3, which increases the predictive power of the ESP. However, the company’s ESP of -0.32% makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Analog Devices, Inc. (NASDAQ:ADI) has an Earnings ESP of +1.73 % and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

AMTEK, Inc. (NYSE:AME) has an Earnings ESP of +0.50% and a Zacks Rank #2.

PerkinElmer, Inc. (NYSE:PKI) has an Earnings ESP of +0.21% and a Zacks Rank #2.

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