Q2 2026 Waters Corp Earnings Call Transcript
Key Points
- Waters Corp (WAT) delivered excellent Q2 2026 results, with organic revenue growing 9% in constant currency, exceeding guidance by 100 basis points.
- The acquired Biosciences and Diagnostic Solutions businesses accelerated to mid-single-digit growth, a 400 basis point improvement from Q1, driven by the successful 180-day plan.
- Strong innovation momentum with new product launches, including the cyclic IMS 20 and Xevo MRTP 10 mass specs, and the BACTEC FXI blood culture system, which received FDA clearance.
- Cost actions are ahead of schedule, with $200 million in expected run-rate savings, supporting margin expansion and mid-teens adjusted EPS growth.
- End-market recovery is broadening, with double-digit growth in pharma and academic/government, and China returning to accretive growth for the legacy business.
- Revenue synergies are building, with $50 million expected in 2026, and early cross-selling in pharma DMPK and diagnostics contributing to results.
- The company raised full-year 2026 guidance for organic revenue, acquired business revenue, and adjusted EPS, reflecting strong momentum.
- Pricing initiatives in the acquired businesses are gaining traction, with 90 basis points of net price realization in Q2, on track to reach 150 basis points.
- The BACTEC FXI replacement opportunity is substantial, with over 12,000 aged systems past due, positioning it as a multiyear growth engine.
- The launch of the FACSDiscover A7 spectral cell analyzer is set for September 15, filling a portfolio gap and targeting a strengthening biotech/academic market.
- Foreign exchange translation is a headwind, with a stronger US dollar expected to reduce full-year revenue by approximately 60 basis points and EPS by $0.25.
- China remains a drag on the acquired businesses, with Flow Clinical declining 20% and microbiology declining 13% due to DRG headwinds and portfolio localization issues.
- The Flow Research business declined 2% in Q2, with lingering headwinds from China and a gap in the instrument portfolio until the A7 launch.
- The company's guidance for Q4 implies a conservative 4% constant currency growth, below recent momentum, due to fewer working days and prudent assumptions.
- The acquired businesses face a 3% growth headwind in Q3 due to the unwinding of BD's trade inventory build, impacting quarterly comparisons.
- Industrial end market growth was soft at 1%, with weakness in chemical analysis due to lumpy ordering patterns and macro sensitivity.
- The reagent rental compliance issue in diagnostics is ongoing, with 700 US contracts identified as out of compliance, requiring mediation and operational changes.
- The company's adjusted EPS growth of 10-12% is below the mid-teens target, partly due to FX and the phasing of cost benefits.
- The full-year adjusted EBIT margin guidance of 28.2% is unchanged, as FX offsets the $20 million overachievement from cost actions.
- The company faces execution risks in integrating the acquired businesses, including leadership changes and the need to sustain momentum in a competitive market.
Welcome to the Waters Corporation second-quarter 2026 financial results conference call. (Operator Instructions) This call is being recorded. If anyone has objections, please disconnect at this time. It is now my pleasure to turn the call over to Mr. Caspar Tudor, Head of Investor Relations.
Please go ahead, sir.
Thank you, Leila, and good morning, everyone. Welcome to Waters Corporation second quarter earnings call. Joining me today are Dr. Udit Batra, our President and Chief Executive Officer; and Amol Chaubal, our Senior Vice President and Chief Financial Officer. Before we begin, I will cover the cautionary language.
In this conference call, we will make various forward-looking statements regarding future events or future financial performance of the company. including the financial and operational impact of Waters, Biosciences and Diagnostic Solutions businesses acquired from Becton, Dickinson and Company or BD. We will provide guidance regarding possible future results and commentary
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