425: Waters Q2 Sales Beat, Raises 2025 Outlook

Waters Corporation reported strong second-quarter 2025 financial results, exceeding sales guidance and raising full-year sales and non-GAAP EPS outlook, driven by robust instrument replacement trends and strategic growth initiatives.

Summary

• Second quarter 2025 sales were $771 million, an increase of 9% as reported and 8% in constant currency, exceeding the company's guidance range.
• GAAP diluted earnings per share (EPS) for Q2 2025 was $2.47, compared to $2.40 for Q2 2024, while non-GAAP EPS grew 12% to $2.95, exceeding the mid-point of guidance.
• Instrument sales grew mid-single-digits in constant currency, led by high-single-digit LC and MS growth, with continued strength in instrument replacement, particularly among large pharma and CDMO customers.
• Recurring revenue increased 11% in constant currency, driven by 9% service growth and double-digit chemistry growth.
• In constant currency, Pharmaceutical market sales grew 11%, Industrial grew 6%, and Academic & Government declined 3%, performing better than expected.
• Full-year 2025 constant currency sales growth guidance was raised to +5.5% to +7.5%, and full-year 2025 non-GAAP EPS guidance was raised to $12.95 to $13.05.
• The proposed combination with BD Biosciences & Diagnostic Solutions is underway, accelerating the company's strategy into high-growth adjacencies and extending its proven execution model into resilient, high-volume end markets.

Sentiment

Score: 9

Explanation: The filing reports strong financial performance for Q2 2025, with sales exceeding guidance and non-GAAP EPS above expectations. The company also raised its full-year sales and earnings guidance, indicating positive momentum. Furthermore, the announcement of a strategic combination with BD Biosciences & Diagnostic Solutions is presented as a significant growth accelerator with anticipated substantial value creation and synergies, signaling a very positive strategic outlook.

Positives

• Q2 2025 sales of $771 million exceeded the company's guidance range.
• Sales grew 9% as reported and 8% in constant currency year-over-year.
• Non-GAAP EPS of $2.95 was above the mid-point of the guidance range, representing a 12% year-over-year growth.
• Instruments sales grew mid-single-digits in constant currency, with high-single-digit growth in LC and MS.
• Strong instrument replacement trends were observed, particularly among large pharma and CDMO customers.
• Recurring revenue grew 11% in constant currency, with service growth at 9% and chemistry growth in double-digits.
• Pharmaceutical market sales grew 11% in constant currency.
• Industrial market sales grew 6% in constant currency.
• Academic & Government market sales, despite a 3% decline, performed better than expected.
• Full-year 2025 constant currency sales growth guidance was raised to +5.5% to +7.5%.
• Full-year 2025 non-GAAP EPS guidance was raised to $12.95 to $13.05, reflecting strong projected growth.
• The proposed combination with BD Biosciences & Diagnostic Solutions is expected to accelerate strategy into high-growth adjacencies and drive substantial value creation for shareholders with immediate synergies.

Negatives

• Academic & Government market sales declined 3% in constant currency for the second quarter of 2025.
• The TA operating segment sales declined 6% in constant currency for the second quarter of 2025.

Risks

• One or more closing conditions to the proposed transaction with Becton, Dickinson and Company (BD), including certain regulatory approvals, may not be satisfied or waived on a timely basis or otherwise.
• A governmental entity may prohibit, delay, or refuse to grant approval for the consummation of the proposed transaction, or may require conditions, limitations, or restrictions in connection with such approvals.
• The required approval by Waters stockholders for the proposed transaction may not be obtained.
• The proposed transaction may not be completed on the terms or in the time frame expected, or at all.
• Unexpected costs, charges, or expenses may result from the proposed transaction.
• There is uncertainty regarding the expected financial performance of the combined company following completion of the proposed transaction.
• Failure to realize the anticipated benefits of the proposed transaction, including as a result of delay in completing the proposed transaction or integrating the businesses of Waters and SpinCo, on the expected timeframe or at all.
• The combined company may face difficulties in implementing its business strategy.
• Difficulties and delays may occur in the combined company achieving revenue and cost synergies.
• The inability of the combined company to retain and hire key personnel.
• The occurrence of any event that could give rise to termination of the proposed transaction.
• Stockholder litigation in connection with the proposed transaction or other litigation, settlements, or investigations may affect the timing or occurrence of the proposed transaction or result in significant costs of defense, indemnification, and liability.
• Evolving legal, regulatory, and tax regimes could impact the company's operations and financial results.
• Changes in general economic and/or industry specific conditions or any volatility resulting from the imposition of and changing policies around tariffs.
• Actions by third parties, including government agencies, could adversely affect the company.
• The anticipated tax treatment of the proposed transaction may not be obtained.
• There is a risk of greater than expected difficulty in separating the business of SpinCo from the other businesses of BD.
• Disruption of management time from ongoing business operations due to the pendency of the proposed transaction.
• Other effects of the pendency of the proposed transaction on the relationship of any of the parties to the transaction with their employees, customers, suppliers, or other counterparties.
• Risks related to expectations regarding the company's strategy, future financial and operational performance, future economic and market conditions, and the growth rates of certain markets.
• Challenges in responding and adapting to changing global dynamics, including the potential impacts of tariffs and supply chain challenges.
• The company's ability to retain and attract customers in various geographies and market segments.
• Risks related to competitive positioning, projected costs, technological capabilities, and objectives of management.

Future Outlook

Waters Corporation is raising its full-year 2025 constant currency sales growth guidance to a range of +5.5% to +7.5% and its reported sales growth to +5.0% to +7.0%. The full-year 2025 non-GAAP EPS guidance is also raised to $12.95 to $13.05, reflecting year-over-year growth of approximately +9% to +10% (+10% to +11% on a constant currency basis). For the third quarter of 2025, the company expects constant currency sales growth of +5.0% to +7.0% and non-GAAP EPS in the range of $3.15 to $3.25. The proposed combination with BD Biosciences & Diagnostic Solutions is expected to accelerate strategy into high-growth adjacencies and drive substantial value creation through synergies.

Management Comments

• "Our team continues to execute extremely well and we delivered excellent results again this quarter, driven by robust instrument replacement trends—particularly among large pharma and CDMO customers."
• "Our performance reflects strong execution against our commercial growth initiatives, rapid uptake of our new products, and contribution from incremental growth vectors such as GLP-1s, PFAS and generics."
• "As a result, we are raising our full-year sales and earnings guidance."
• "The strength of our core business provides the foundation for our next phase of growth. Our combination with BD Biosciences & Diagnostic Solutions accelerates our strategy into multiple high-growth adjacencies, while extending the reach of our proven execution model into resilient, high-volume end markets."
• "We are well positioned to drive substantial value creation for shareholders with synergies that create immediate impact."
• "Integration planning is underway, and I’m pleased to share that Chris Ross, SVP of Global Operations, will lead this effort. Chris and I successfully partnered on the EMD MilliporeSigma-Aldrich integration, and I’m confident in his leadership to deliver strong results once again."

Industry Context

Waters Corporation operates in the analytical instruments, separations technologies, and software sectors, serving life, materials, food, and environmental sciences. The strong performance, particularly in instrument replacement and recurring revenue, indicates healthy demand within the pharmaceutical and industrial sectors, potentially driven by new product uptake and growth vectors like GLP-1s, PFAS, and generics. The proposed combination with BD Biosciences & Diagnostic Solutions signifies a strategic move to expand into high-growth adjacencies and high-volume end markets, reflecting a broader industry trend of consolidation and diversification to capture new opportunities and enhance market resilience.

Comparison to Industry Standards

• No specific comparable companies, projects, or results are listed in the filing for direct comparison to industry standards. The filing notes that non-GAAP measures are used for 'comparison to competitors operating results' but does not provide the actual comparison data.

Stakeholder Impact

• Shareholders: Potential for substantial value creation through synergies from the proposed combination with BD Biosciences & Diagnostic Solutions; will be required to vote on the proposed transaction.
• Employees: Retention bonus obligations related to the Wyatt acquisition are ongoing; potential for disruption or changes related to the integration of BD Biosciences & Diagnostic Solutions, including retention and hiring of key personnel.
• Customers: Continued strong instrument replacement trends, particularly among large pharma and CDMO customers; expanded product and service offerings and market reach through the BD Biosciences & Diagnostic Solutions combination.
• Suppliers: Potential for changes in supply chain dynamics or relationships as a result of the integration with BD Biosciences & Diagnostic Solutions.

Next Steps

• Waters Corporation intends to file a registration statement on Form S-4, which will include a preliminary and definitive proxy statement/prospectus, in connection with the proposed transaction with BD.
• The definitive proxy statement/prospectus will be mailed to Waters stockholders.
• Augusta SpinCo Corporation (SpinCo) intends to file a registration statement on Form 10, which will serve as an information statement/prospectus in connection with its spin-off from BD.
• Investors and security holders of Waters and BD are urged to read the proxy statement/prospectus, information statement/prospectus, and any other documents filed with the SEC carefully and in their entirety when they become available.
• Integration planning for the combination with BD Biosciences & Diagnostic Solutions is underway, led by Chris Ross, SVP of Global Operations.

Key Dates

Recommendation

Waters Corporation delivered strong second-quarter results, surpassing sales and non-GAAP EPS guidance, and subsequently raised its full-year outlook, demonstrating robust operational execution and market demand, particularly in the pharmaceutical sector. The strategic proposed combination with BD Biosciences & Diagnostic Solutions is a significant catalyst, positioning the company for accelerated growth in high-growth adjacencies and promising substantial value creation through synergies. This strong financial performance combined with a clear, accretive strategic expansion makes the stock highly attractive.

Keywords

Waters Corporation, WAT, Financial Results, Q2 2025, Earnings Report, SEC Filing, Analytical Instruments, Separations Technologies, Laboratory Equipment, Life Sciences, Pharmaceutical, Biotechnology, CDMO, Mass Spectrometry, Liquid Chromatography, Recurring Revenue, Guidance Update, Merger, Acquisition, BD Biosciences, Becton Dickinson, Spin-off, Corporate Governance, Risk Management