Evercore ISI analyst Vijay Kumar lowered the price target on Waters Corp. (NYSE: WAT) to $320.00 (from $340.00) while maintaining a In Line rating.

The analyst comments "WAT’s 1Q results were in line with ST, and core organic declines of -9% came in at the HE of the Guide; along with OpEx mgmt. & lower below the line expenses, WAT Beat ST EPS by ~5%. In conjunction, mgmt. reiterated its FY24 Guide of -0.5% to 1.5% and EPS of $11.75 - $12.05. At a high level, this narrative (1Q in-line to better & Guide reiteration) is consistent with peer LST…digging a level deeper, instruments came in a tad below expecs and were partly offset by better recurring revs (similar to peers). However there were a couple of comments that stood out for us. Starting with the cadence in 1Q, it looks like WAT had a stronger finish to the Q, which offset the softer start. Mgmt. noted that the activity levels within the funnel had improved in 2Q…customer conversations were more specific on budget allocation (plans for specific projects) relative to 2H’23 trends. Interestingly mgmt. noted that early stage biotech customer conversations had improved as budgets were being released. Finally, some orders in EU were pushed out from 1Q to 2Q (given the late Q improvement in trends) and should provide some cushion for 2Q. Second, China has been a focal point for investors…and WAT’s 1Q China perf of mid-teens declines came in slightly better than expecs. Mgmt noted that the stimulus specifically called for instrument upgrades / replacement, and while we don’t know the details around implementation, the stimulus announcement could lift sentiment in 2H. WAT thinks that China based CDMO companies have essentially bottomed out relative to volumes from ex China customers (as global MNCs moved away on geopolitical concerns); going forward, domestic demand should be the main driver and stimulus should help. From a ST perspective, the 2H ramp (see Fig 1) has been the concern…but when we look at the 1Q24 CAGR vs 1Q19, the Guide essentially assumes remaining Qs to play out similar to 1Q. On our part, we would like to get a better handle on China turnaround and details of the stimulus program (is this a loan program vs cash injection) before getting more constructive. We are updating our PT to $320, which equates to ~27x P/E, ~20x EBITDA and 3.5% FCF yield (consistent w peers)."