Waters Corporation: What Can the Past Teach us about the Future?

Waters Corporation (NYSE:WAT) demands our attention today because the stock has been showing an obstinately bullish pattern that option traders could find profitable. Waters Corporation with its market capitalization of $11.01B is an analytical instrument manufacturer that primarily designs, manufactures, sells and services, through its Waters Division, high performance liquid chromatography (HPLC), ultra-performance liquid chromatography (UPLC and together with HPLC, referred to as LC) and mass spectrometry (MS) technology systems.

Why Are We Looking at Waters Corporation Today?

Waters Corporation caught my attention yesterday after the stock marked a new 52-week high of $135.90 during the session before it closed with 1.18% gains at $134.76. The shares of Waters Corporation have been having an impressively bullish run lately. For instance, the stock has climbed 45.25% from a 52-week low of $93.56 in mid-October 2014 to the new 52-week high of $135.90 that was recorded yesterday.

More recently, the stock has recorded 8 new highs in the last one month and it has gained 8.66% within the same period. In addition, the stock is in a strong uptrend because its 50-day moving average of $125.64 is higher than its 100-day moving average of $121, which is in turn higher than its 200-day moving average of $114.14.

Why is Waters Corporation Surging?

One of the major reasons that could be advanced for the rally being recorded in the shares of Waters Corporation is the quality of the company’s first quarter (transcript) earnings result that was posted on April 28. Highlights of the first quarter results are presented below:

Waters Corporation reported earnings of $1.21 per share or beat the consensus estimate of $1.02. The reported earnings marks a 31.52% increase on the earnings of $0.92 from the comparable quarter in 2014

The company reported revenue of $460.4M to beat the consensus estimate of $441M. The reported revenue marks a 4.4% increase over analysts’ estimates.

Waters Corporation reported that its costs of goods sold increased by a mere 1% to $189M, leading to an impressive gross profit growth of 12%.

The company’s R&D expenses climbed by 16% to $29M to suggest that the company is working hard at delivering innovative products for continued sustenance and growth of its market share

Going Down Memory Lane

A trip down Waters Corporation’s memory lane provides interesting insight into the company’s recent performance, and its helps us to chart a course for where the stock and call options of Waters Corporation might be headed.  Waters Corporation has increased its share price by 250% in the last 10 years as the chart below shows.

WAT Chart

Water’s corporation has consistently beat EPS estimates in the last four quarters and the company has grown its earnings per share by an impressive 192.9% over the course of the last 10 years. The company has increased its net income by an incredible 104.1% in the last 10 years. In addition, worthy of mention is the fact that the company has increased its revenue by 76.83% in the last 10 years.

How to Trade WAT Options

I am bullish about the prospects of Waters Corporation and the stock’s number 2 “Buy” Zacks rank and a style score of “A” on Momentum suggests that institutional analysts feel the same way about the stock. I recommend that you buy WAT call options. You’ll do well to consider the WAT Nov 2015 130.000 call (WAT151120C00130000) at an asking price of $11.68.

— Daily Option Alerts

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