Milford, Massachusetts-based Waters Corporation (WAT) is an analytical laboratory instrument and software company that specializes in high-performance liquid chromatography (HPLC), ultra-performance liquid chromatography (UPLC), mass spectrometry (MS), and thermal analysis instruments. Valued at a market cap of $20.6 billion, the company's products are used by clinical, pharmaceutical, biochemical, industrial, environmental, academic, and governmental customers working in research and development, quality assurance, and other laboratory applications.

This analytical laboratory instrument manufacturing company has underperformed the broader market over the past 52 weeks. Shares of WAT have gained 2.8% over this time frame, while the broader S&P 500 Index ($SPX) has surged 10.2%. Moreover, on a YTD basis, the stock is down 6.6%, compared to SPX’s 1.3% drop. 

Nonetheless, narrowing the focus, WAT has outpaced the Health Care Select Sector SPDR Fund’s (XLV) 10.1% loss over the past 52 weeks. However, it has lagged behind the ETF’s 5.3% decline on a YTD basis. 

On May 6, WAT’s shares fell 2.7% after its Q1 earnings release, despite delivering a better-than-expected performance. The company posted revenue of $661.7 million and adjusted EPS of $2.25, both above Wall Street estimates. Moreover, compared to the year-ago quarter, its top line improved by 3.9%, while its bottom line advanced by 1.8%. Strong performance in pharmaceutical markets, double-digit growth in its instrument sales, and the continued traction of its innovative product portfolio aided the results. Additionally, looking ahead, WAT raised its fiscal 2025 guidance, and now expects sales growth of 4% to 6%, and adjusted EPS in the range of $12.75 to $13.05. 

However, a 1.7% year-over-year decline in its adjusted operating income to $168.9 million and a 1.3% drop in its cash flow from operating activities to $259.6 million might have raised investor concerns and contributed to the negative market reaction.

For the current fiscal year, ending in December, analysts expect WAT’s EPS to grow 8.7% year over year to $12.89. The company’s earnings surprise history is promising. It topped the consensus estimates in each of the last four quarters. 

Among the 18 analysts covering the stock, the consensus rating is a “Moderate Buy” which is based on seven “Strong Buy,” and 11 “Hold” ratings. 

This configuration is more bullish than two months ago, with five analysts suggesting a “Strong Buy” rating. 

On May 22, Brandon Couillard from Wells Fargo & Company (WFC) maintained a “Buy” rating on WAT with a price target of $420, which indicates a 21.3% potential upside from the current levels. 

The mean price target of $394.11 represents a 13.8% premium from WAT’s current price levels, while the Street-high price target of $460 suggests an ambitious upside potential of 32.8%.