As earnings season kicks into high gear, one of the key trends we are tracking on the Amenity Viewer text analytics platform is corporate sentiment regarding the macro and trade environment in China. More specifically, we have been tracking the MedTech sector’s position as the lone beacon of strength as weak macro and micro data points regarding China hit every day.

We first identified MedTech as an outlier in our write-up on U.S. vs China Trade analysis. Our analysis was then supported by bullish commentary at the JP Morgan Healthcare Conference two weeks ago. Waters’ earnings call this morning followed suit, sending the stock up 10% today. Stay tuned for further updates across MedTech throughout earnings season.

Waters' Commentary on China Mirrors Peers at the JPM Conference

The Waters earnings call this morning registered an Amenity Score of +40 (scale -100 to +100), up from 25 last quarter. The overall average last quarter was +20.  The earnings sentiment analysis shows that the bullish China theme for MedTech is intact and stands in stark contrast to other sectors such as Consumer or Industrial.

Some additional Waters Corporation commentary:

1/23/19:

• "Asia, our largest region in terms of revenue, was up 9% in the fourth quarter on strong double-digit growth in China as well as great performances in Korea and Japan."

1/23/19:

• "The industrial business was a little bit softer in China relative to the overall growth rate, but very much led by pharma and academic and government."

Looking at the earnings transcript view, it becomes increasingly clear how much positive sentiment was attributed to China/Asia:

Uptick in Share Buyback Shows Confidence in Ongoing Strength

Capital Deployment stood out as one of the positive Key Drivers when compared to Waters' Q3 call. Upon digging further, the Amenity Viewer platform identified an uptick in share repurchase from $264 million in Q3 to $498 million in Q4:

Any Caution Flags from Waters Corporation's Call? FX is the Most Prevalent

Earnings calls are never one-sided, so we analyzed the clusters of negative comments in the earnings call to look for looming risk factors.  What emerged was FX headwind, a trend we expect to impact most multi-national companies across sectors due to the stronger dollar:

Waters (1/23/19):

• "Currency translation decreased sales growth by approximately 1%."
• "At today’s rates, currency translation is expected to decrease first quarter sales growth by 2 to 3 percentage points."
• "...assumes an approximate 1 percentage point negative impact from currency translation."

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Transcript text provided by S&P Global Market Intelligence.

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