On Thursday, CFRA upgraded Waters Corp . (NYSE: NYSE:WAT) stock from Hold to Buy, adjusting the price target upwards to $389 from the previous $348. The revision comes ahead of the company's anticipated third-quarter earnings report scheduled for November 4.
The analyst from CFRA justified the upgrade by pointing to an expected improvement in the Life Sciences Tools and Services sub-industry. The firm anticipates that Waters Corp. will experience top-line sales growth in the third quarter, which would mark a positive shift from the declines seen in previous quarters.
CFRA also adjusted its earnings per share (EPS) estimates for the company, raising the 2024 forecast to $11.64 from $11.58, while slightly lowering the 2025 projection to $12.86 from $13.02. The new price target of $389 is based on 30.2 times the firm's 2025 EPS view, which is above Waters Corp.'s historical forward P/E average.
The analyst's outlook suggests a gradual recovery through 2025 for the sector, supported by signs of improvement in business conditions and the funding environment. Waters Corp.'s strategic investments in recent years are expected to position the company well to capitalize on this recovery and the commencement of instrument replacement cycles.
The CFRA report also highlights that with one third of Waters Corp.'s pharmaceutical revenues coming from large molecules and new modalities, the company is poised to benefit from high-growth opportunities and solid drug development fundamentals over the long term.
InvestingPro Insights
Recent data from InvestingPro aligns with CFRA's optimistic outlook on Waters Corp. (NYSE: WAT). The company's stock is currently trading near its 52-week high, with a robust 37.94% price total return over the past year. This performance suggests investor confidence in Waters Corp.'s prospects, supporting CFRA's upgrade to Buy.
InvestingPro Tips indicate that Waters Corp. operates with a moderate level of debt and has liquid assets exceeding short-term obligations, which could provide financial flexibility as the company positions itself for the anticipated sector recovery. Additionally, the company's high return over the last decade aligns with CFRA's view on Waters Corp.'s strategic investments paying off.
It's worth noting that Waters Corp. is trading at a high earnings multiple, with a P/E ratio of 34.47. This valuation reflects market expectations for future growth, which corresponds with CFRA's projections for improved top-line sales and earnings per share.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for Waters Corp., providing deeper insights into the company's financial health and market position.
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