Why Is Waters (WAT) Down 2.2% Since Last Earnings Report?

Core Viewpoint - Waters has reported a decline in year-over-year earnings and sales, raising concerns about its performance in various markets, while some segments show positive growth [2][3][11]. Financial Performance - Waters reported Q2 2024 non-GAAP earnings of $2.63 per share, exceeding estimates by 3.1%, but down 6.1% year-over-year [2]. - Net sales reached $708.53 million, surpassing the consensus estimate of $698 million, but fell 4% year-over-year [2]. - The Waters segment accounted for 88% of net sales, generating $622.56 million, down 5% year-over-year, while the TA segment contributed $85.97 million, reflecting a 2% decline [4]. Segment Analysis - Instruments sales (41% of total) were $294.06 million, down 14% year-over-year; Services (39%) increased 4% to $273.4 million; Chemistry (20%) also grew 4% to $141.1 million [5]. - The Pharmaceutical market (58% of sales) generated $415.75 million, down 3% year-over-year; the Industrial market (32%) saw sales of $221.39 million, down 4%; and the Governmental & Academic market (10%) dropped 15% to $71.4 million [6][7][8]. Geographic Performance - Sales in Asia (34% of total) were $237.43 million, down 7% year-over-year; the Americas (38%) generated $274.47 million, decreasing 3%; and Europe (28%) saw sales of $196.63 million, also down 3% [6][7][8]. Operating Details - Non-GAAP selling and administrative expenses were $168.3 million, down 4% year-over-year, while research and development spending was $44.9 million, a slight decrease of 0.2% [9]. - The adjusted operating margin was 29.2%, contracting 40 basis points year-over-year [9]. Cash Flow and Balance Sheet - As of June 30, 2024, cash and equivalents were $327.4 million, down from $338.2 million as of March 31, 2024 [10]. - Cash from operations was $54.5 million, significantly down from $262.9 million in the prior quarter, with free cash flow recorded at $143.5 million [10]. Guidance - For Q3 2024, Waters expects non-GAAP earnings of $2.60-$2.70 per share, with organic sales growth anticipated at 1-3% on a constant-currency basis [11]. - For the full year 2024, non-GAAP earnings are projected at $11.55-$11.65 per share, with organic sales expected to decline 2-0.5% [12]. Market Sentiment - There has been a downward trend in estimates, with a consensus estimate shift of -7.57% [13]. - Waters currently holds a Zacks Rank 4 (Sell), indicating expectations of below-average returns in the coming months [14].