Release Date: November 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Waters Corp (WAT, Financial) reported strong third-quarter results with revenue, margin performance, and earnings per share significantly exceeding expectations.
- Sales were above the high end of guidance, with all three reported regions returning to positive growth, led by the pharma and industrial markets.
- Recurring revenue growth accelerated, driven by an 8% increase in the chemistry consumables portfolio.
- The company achieved adjusted EPS growth over 10% higher than the midpoint of their guidance, reflecting strong operational management.
- Waters Corp (WAT) launched new products, including the Alliance iS and Xevo TQ Absolute, which have been well-received and are contributing to growth.
Negative Points
- China sales were a slight headwind, with mid-single-digit declines, although there was some stabilization.
- The company faces dynamic market conditions, which could impact future growth and recovery pace.
- Despite strong performance, the full-year sales growth guidance remains slightly negative, indicating challenges in achieving positive growth.
- Currency translation is expected to negatively impact fourth-quarter reported sales growth by approximately 1.7%.
- The timing and impact of the Chinese stimulus remain uncertain, which could affect future order and sales growth.
Q & A Highlights
Q: Can you discuss the percentage of liquid chromatography (LC) systems going to customers with existing Arc systems versus those without, and the impact of the new PEA module on LC sales? Also, what other drivers could influence the replacement cycle in the coming years?
A: Udit Batra, President and CEO, explained that LC systems have returned to growth after seven quarters of decline, driven by strong performance in India and large pharma QA/QC segments. The replacement cycle is beginning, with increasing adoption of the Alliance iS system, which has been trialed by major pharma customers. The replacement cycle is supported by factors like patent expirations and GLP-1 moving to orals, which could drive further growth.
Q: Are you willing to provide preliminary comments on next year's growth, given the current tailwinds?
A: Udit Batra stated that while they won't provide specific guidance for 2025 yet, they are optimistic about recurring revenue growth and the potential for instrument growth driven by generics, PFAS testing, and GLP-1. The speed of the replacement cycle and the impact of China's stimulus are key variables to watch.
Q: Can you elaborate on Waters' competitive position in instrumentation growth, particularly in LC and mass spectrometry (MS)?
A: Udit Batra highlighted Waters' strong position in QA/QC testing for marketed drugs, which differentiates them from peers. The company benefits from a robust recurring revenue stream and a revitalized product portfolio, including the Alliance iS and Xevo TQ Absolute, which are gaining traction in the market.
Q: How do you view the medium-term growth prospects in China, given the current economic conditions?
A: Udit Batra noted that while China's GDP growth has slowed, Waters is well-positioned to outgrow the market due to its advantaged portfolio and strong execution. The company expects China to be a mid-single-digit grower in the medium term.
Q: Can you provide more details on the impact of PFAS and GLP-1 on Waters' growth?
A: Amol Chaubal, CFO, stated that PFAS and GLP-1 are expected to contribute 30 to 40 basis points of accretive growth. PFAS testing is expanding into food and consumer products, while GLP-1's growth is driven by its increasing share of prescription volumes and CapEx in the pharma sector.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
