Sometimes the market's first reaction isn't the right reaction. When Becton, Dickinson and Company (BDX) announced plans in July 2025 to combine its Biosciences & Diagnostic Solutions business with Waters Corporation (WAT), investors weren't exactly thrilled. Waters shares tumbled about 20% in the week following the announcement.
The concern was understandable. Waters had a nice, clean business model with high margins, and suddenly it was bolting on a large, different operation. Integration risk, changed financial profile, complexity—all the things that make investors nervous were suddenly on the table.
But now that the dust has settled, William Blair thinks the initial panic was overdone. The firm initiated coverage on Waters Monday with an Outperform rating, arguing the merger makes more strategic sense than the market initially gave it credit for.
The Numbers Look Pretty Good
Analyst Matt Larew sees the deal adding roughly $0.10 to earnings per share in 2026, then ramping up to about $2.70 by 2028. He's modeling $15.55 of EPS in 2027, which jumps to $17.18 once the BD merger closes.
Waters holds a leading position in the quality assurance and control market, which tends to be pretty resilient. The company's core end markets are expected to improve next year compared to this year, marking the first year-over-year recovery since before COVID hit.
The stock has already bounced back from its post-announcement lows, helped by a broader recovery in life sciences tools and by management doing some damage control. Through recent investor outreach, the Waters team has clarified synergy targets and explained why the strategic fit actually makes sense. That seems to have calmed nerves.
Conservative Targets, Big Upside
Larew sees roughly 20% upside by the end of 2026, based on applying a multiple of 26 times to the 2027 post-merger EPS target. For context, Waters currently trades at 26.7 times earnings, the 10-year average is 25.9 times, and peers trade at 25.2 times. So we're talking about reasonable valuation territory, not pie-in-the-sky optimism.
The combined company should continue delivering above-peer growth, margins, and return on invested capital. William Blair also notes that the deal brings portfolio overlaps and strategic adjacencies that make operational sense.
Here's where it gets interesting: the analyst thinks Waters' target of $345 million in total EBITDA synergies by year five will prove conservative. He points to similar blockbuster deals in life sciences over the past 20 years that ended up delivering more synergies than initially expected. Think Thermo Fisher Scientific Inc. (TMO) acquiring Life Technologies, or Merck buying Sigma-Aldrich. Both deals realized greater post-acquisition synergies than the pre-deal projections.
Waters shares were trading up 1.21% at $399.75 on Tuesday.
