Sign in
WC

WATERS CORP /DE/ (WAT)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue was $873M (+6% reported, +8% constant currency) and non-GAAP EPS was $4.10 (+13% YoY), at the high end of guidance; GAAP EPS was $3.88. FX headwinds were significant, with a ~$0.23 adverse impact versus guidance and ~9% drag on non-GAAP EPS .
  • Growth was broad-based: Pharma +10% constant currency; instruments +8% cc; recurring revenue +9% cc; all three regions accelerated. Management cited strong adoption of Alliance iS and Xevo TQ Absolute as drivers .
  • 2025 outlook: constant currency sales growth +4.5% to +7.0% (reported +2.5% to +5.0%) and non-GAAP EPS $12.70–$13.00, with FX headwind ~4%; Q1 2025 constant currency +4% to +7% and non-GAAP EPS $2.17–$2.25 with ~7% FX EPS headwind .
  • Cash flow and leverage: Q4 free cash flow $188M; FY 2024 free cash flow $744M (25% of sales). Net debt-to-EBITDA ~1.3x after ~$900M debt reduction in 2024, providing flexibility for M&A or buybacks .
  • Wall Street consensus from S&P Global was unavailable at time of request due to a data access error; comparisons use company guidance and reported results [GetEstimates error].

What Went Well and What Went Wrong

What Went Well

  • Instruments and recurring revenue both grew high single digits in constant currency, with instruments +8% and recurring +9% cc; “Growth accelerated across all regions, driven by strong adoption of new products and the success of our strategic initiatives” .
  • Pharma rose +10% cc, with strong year-end dynamics; “We delivered excellent results in the fourth quarter, led by double-digit growth in Pharma” .
  • Margin execution: adjusted operating margin expanded 60 bps to 35.5% despite 220 bps FX impact; “Offsetting currency and macroeconomic headwinds is something our team has gotten very good at” .

What Went Wrong

  • FX headwinds: Q4 non-GAAP EPS included ~9% decline due to FX and was $0.23 more adverse than anticipated in guidance; management expects ~4% full-year 2025 FX headwind and ~7% in Q1 2025 .
  • Academic & Government is choppy; while Q4 benefited from budget flush, management assumes low single-digit growth in 2025 given uncertainties (including potential NIH/EPA funding dynamics) .
  • China remains muted; Q4 returned to low single-digit growth with modest stimulus contribution and low-single-digit posture assumed for 2025 .

Financial Results

Headline Comparison vs Prior Periods and Guidance

MetricQ4 2023Q3 2024Q4 2024Vs Guidance
Revenue ($USD Millions)$819.5 $740.3 $872.7 Exceeded high-end; cc +8% vs +5–7% guided
GAAP EPS ($)$3.65 $2.71 $3.88 In-line/high end; FX adverse vs guide by ~$0.23
Non-GAAP EPS ($)$3.62 $2.93 $4.10 At high end of $3.90–$4.10
Operating Income Margin % (GAAP)32.2% 28.5% 33.5% Above prior periods
Adjusted Operating Margin % (Non-GAAP)34.9% 30.8% 35.5% Expanded despite FX

Segment, Product, Geography, and Market Breakdown (Q4 2024 vs Q4 2023)

CategoryQ4 2023 ($M)Q4 2024 ($M)YoY % (Reported)Constant Currency Growth
Waters (segment)$716.9 $764.3 +7% +8%
TA (segment)$102.5 $108.4 +6% +7%
Instruments$397.2 $419.6 +6% +8%
Service$278.9 $301.8 +8% +9%
Chemistry$143.4 $151.3 +5% +7%
Total Recurring$422.3 $453.1 +7% +9%
Asia$261.9 $272.9 +4% +9%
Americas$303.7 $321.0 +6% +6%
Europe$253.8 $278.8 +10% +11%
Pharmaceutical$463.7 $498.8 +8% +10%
Industrial$260.2 $264.0 +1% +2%
Academic & Government$95.5 $109.9 +15% +16%

KPIs and Operational Metrics

KPIQ4 2024FY 2024Notes
Gross Margin % (GAAP)60.1% 59.4% Ex-FX: +60 bps and +80 bps, respectively
Adjusted Operating Margin %35.5% 31.0% Q4 expanded +60 bps YoY; full-year after ~130 bps FX impact
Free Cash Flow ($M)$188.0 $744.3 FY FCF 25% of sales; FCF/Adj. NI 105%
Net Debt/EBITDA~1.3x N/A~$900M debt repaid in 2024
Service Plan Attachment (Installed Base)>50% N/ATargeting ~55%
PFAS Revenue Growth>40% >40% Market now sized at ~$400M, +20% CAGR
India % of Sales>8% N/AIndia growth 34% in Q4; 27% FY cc

Guidance Changes

New 2025 and Q1 2025 Guidance

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Constant Currency Sales GrowthFY 2025N/A+4.5% to +7.0% New
Currency Translation ImpactFY 2025N/A~-2.0% New
Reported Sales GrowthFY 2025N/A+2.5% to +5.0% New
Non-GAAP EPSFY 2025N/A$12.70–$13.00 New
Gross MarginFY 2025N/A~59.6% New
Adjusted Operating MarginFY 2025N/A~31.2% New
Net Interest ExpenseFY 2025N/A~$46M New
Tax RateFY 2025N/A~16.5% New
Avg. Diluted SharesFY 2025N/A~59.3M New
Constant Currency Sales GrowthQ1 2025N/A+4% to +7% New
Currency Translation ImpactQ1 2025N/A~-3% New
Reported Sales GrowthQ1 2025N/A+1% to +4% New
Non-GAAP EPSQ1 2025N/A$2.17–$2.25 New
FX EPS HeadwindQ1 2025N/A~7% New

Q4 2024 Actual vs Q3 Issued Guidance

MetricQ4 2024 Guidance (issued Nov-1)Q4 2024 ActualOutcome
Constant Currency Sales Growth+5% to +7% +8% Beat
Non-GAAP EPS$3.90–$4.10 $4.10 High end
FX Impact vs Guidance~-3% EPS ~$0.23 more adverse Worse FX

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024 and Q3 2024)Current Period (Q4 2024)Trend
Instrument replacement cycleEarly signs of recovery; LC in 7th quarter of decline, anticipated catch-up; instruments returned to growth in Q3 “Beginning to kick into gear”; instruments +8% cc; Alliance iS 20% of HPLC revenue Strengthening
PFAS testingConsistent tailwind noted in Q2 PFAS revenue +40% Q4 and FY; market sized at ~$400M Accelerating
Pricing disciplineAhead of historical levels in Q2 ~200 bps contribution in 2024; same assumed in 2025 Sustained
China stimulusExpected to convert in 2025; Q2 improving funnels Q4 China returned to low single-digit growth; modest stimulus; low single-digit posture assumed for 2025 Modest improvement
India growthQ2 strong; LC +~50% noted over time Q4 +34% cc; FY +27% cc; >8% of company sales; contributes 70–100 bps to growth Very strong
FX headwinds~2% headwind in Q2 Q4 EPS had ~9% FX drag; Q1’25 EPS headwind ~7%; FY’25 ~4% Intensifying
Academic & GovernmentWeak in H1; lumpy funding Budget flush in Q4; 2025 assumption low single-digit Volatile
Service attachment / softwareProgress on attachment; Empower ecosystem >50% installed base under service plans; target ~55% Improving

Management Commentary

  • “We delivered excellent results in the fourth quarter, led by double-digit growth in Pharma, while instruments and recurring revenue both grew high single-digits in constant currency” — Udit Batra, CEO .
  • “We achieved a 60 basis point increase in adjusted operating margin to 35.5% after absorbing 220 basis points of FX impact” — Udit Batra .
  • “With the strong free cash flow generation…our net debt position was approximately $1.3 billion, which is a net debt-to-EBITDA ratio of about 1.3x” — Amol Chaubal, CFO .
  • “PFAS revenue grew over 40% in the fourth quarter and for the year…we have the most sensitive instrument in the market” — Udit Batra .

Q&A Highlights

  • Budget flush and replacement cycle: Q4 ramp was typical (high-teens from Q3), and instruments replacement is broadening across large pharma/CDMOs; Alliance iS reached 20% of HPLC revenue in Q4 .
  • Guidance composition: PFAS and GLP-1 each contribute ~30 bps to growth, India 70–100 bps; pricing contribution ~200 bps; China assumed low single-digit growth with modest stimulus .
  • A&G and NIH risk: Q4 strong on budget flush, but 2025 A&G assumption is low single-digit; direct NIH exposure <1% .
  • Mass Spec drivers: Uptake driven by portfolio and applications (PFAS, clinical, bioanalytics), not LC replacement; Xevo TQ Absolute 50% of tandem quad revenue in Q4 .
  • Service attachment: >50% active installed base with plans; path to ~55% and focus on lead-generation via service .

Estimates Context

  • S&P Global consensus data was unavailable due to an access error at the time of request. As a proxy, company guidance and reported outcomes indicate Q4 non-GAAP EPS landed at the high end of guidance ($4.10) and revenue exceeded the high-end of the range (+8% cc vs +5–7% guided) .
  • Given the FX headwind exceeded plan (~$0.23 adverse), near-term estimate models may need to reflect stronger FX drag on EPS and margins, while acknowledging underlying operational strength and demand recovery .

Key Takeaways for Investors

  • Demand recovery is tangible: instruments +8% cc and recurring +9% cc, with Pharma +10% cc and all regions accelerating; narrative of replacement cycle turning is credible and supported by product adoption metrics .
  • Margin resilience: adjusted operating margin expanded to 35.5% in Q4 despite FX; 2025 framework embeds continued margin expansion (31.2% adjusted OPM) with FX headwinds accounted for .
  • FX is the primary near-term risk: Q1’25 EPS headwind ~7% and FY’25 ~4%; if the dollar stabilizes, reported EPS/OPM could outperform .
  • PFAS and GLP-1 are durable growth vectors: PFAS up >40% and GLP-1 testing adds ~30 bps growth; India contributes 70–100 bps with strong generics exposure .
  • China improving but muted: low single-digit growth and modest stimulus support; do not over-model China until stimulus impact is clearer .
  • Capital allocation optionality is increasing: FCF robustness (25% of sales) and net leverage ~1.3x position WAT for resumed buybacks/M&A .
  • Near-term catalyst: Investor Day (Mar 5) to detail commercial/value-creation initiatives and AI in service—watch for specifics on upsell, pricing, and adjacencies to refine estimates and thesis .
Note: Wall Street consensus via S&P Global was unavailable due to a data access error at time of analysis; estimate comparisons here rely on company-issued guidance and reported outcomes.