Vion IMS QTof mass spectrometer. Image source: Waters Corporation.

What happened

Scientific-instrument manufacturer Waters (WAT 0.30%) is down over 11% at 2:47 p.m. EDT after releasing third-quarter earnings this morning.

So what

The numbers for the recently completed quarter weren't that bad. Revenue increased 5% year over year, on the back of sales to biopharmaceutical companies that grew 13% year over year, and growth in Asia that was up 16% year over year. The revenue growth missed previous guidance of a 6% to 7% year-over-year increase, which management blamed on "softer demand from our industrial, governmental, and academic customers."

Earnings per share grew even faster than revenue, up 9% year over year, as Waters kept spending in check. For instance, selling and administrative expenses were slightly lower year over year, despite the increase in revenue. Doing more with less is always a good move, but investors are rightfully focused on top-line growth. After all, companies can't cut costs forever.

Investors may also be disappointed with management's guidance for the rest of the year, which unfortunately wasn't included in the press release; investors had to listen to the conference call to get the full scoop. Waters is looking for adjusted earnings per share between $6.48 to $6.58 for the year, compared to previous guidance of $6.45 to $6.60 per share. The company trimmed a little off the top and the bottom of the range, but kept the midpoint essentially in the same place.

Now what

On the surface, today's decline seems like a bit of an overreaction, but Waters had been trading at all-time highs, so a pullback after an earnings report that was decent but not stellar shouldn't be much of a surprise.

There's some reason to be worried about weak sales to industrial, governmental, and academic customers, but those can be lumpy, especially with some of Waters' larger equipment that requires large capital outlays. Today's decline allows investors who are willing to assume that risk an opportunity to buy at a discount.