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Why Is Watts Water (WTS) Down 10.5% Since Last Earnings Report?
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A month has gone by since the last earnings report for Watts Water (WTS - Free Report) . Shares have lost about 10.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Watts Water due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Watts Water Q1 Earnings Beat Estimates
Watts Water reported first-quarter 2024 adjusted earnings per share (EPS) of $2.33, which increased 21% on a year-over-year basis and beat the Zacks Consensus Estimate by 10.4%.
The company’s quarterly net sales rose 21% year over year to $570.9 million. The top line surpassed the Zacks Consensus Estimate by 3.5%. Organic sales were up 6% year over year.
The company’s performance benefited from higher revenue growth in the Asia-Pacific, the Middle East and Africa (APMEA) and America amid rising inflation.
Segment Results
Americas: Net sales rose 30% year over year to $419 million. Organic sales increased 11% due to extra shipping days, favorable prices and growth in core valve products. Adjusted operating margin decreased 40 basis points (bps) year over year to 22.1% due to inflation, higher investments and the dilutive impact of the Bradley acquisition, partly offset by increased price realization.
Europe: Net sales fell 4% year over year to $123 million, including a favorable foreign exchange impact of 1%. Organic sales were down 5% due to lower volumes in both fluid solutions. Adjusted operating margin was up 110 bps year over year to 15.7%, owing to favorable price-cost dynamic and product mix.
APMEA: Net sales increased 43% to $29 million. Organic sales moved up 6% from New Zealand, Australia and the Middle East. The unfavorable foreign exchange impact was 3%. Adjusted operating margin decreased 150 bps to 18.2% due to inflation and dilution from the Enware acquisition.
Other Details
Gross profit increased 22.7% year over year to $267.5 million. Selling, general and administrative expenses increased 26.9% year over year to $169.6 million. Operating income was $96.7 million, up 14.2% year over year.
GAAP operating margin decreased 110 bps to 16.9%. The adjusted operating margin was 18.2%, up 30 bps year over year.
Cash Flow & Liquidity
For the fiscal first quarter, Watts Water generated $45.6 million of cash from operating activities compared with $33.4 million in the prior-year period.
As of Mar 31, 2024, free cash flow was $36.6 million compared with $28.3 million in the year-ago period. The increase was due to higher net income and reduced working capital investment.
The company repurchased 23,000 shares for $4 million in the first quarter. As of Mar 31, 2024, the company had $237.1 million in cash and cash equivalents with $283.5 million of long-term debt compared with the respective figures of $350.1 million and $298.2 million as of Dec 31, 2023.
Guidance
For second-quarter 2024, the company expects organic sales to decrease in the range of 1. The adjusted operating margin is estimated to be between 17.6% and 18.2%, while the adjusted margin is projected to decrease in the range of 160 bps-100 bps. The company expects the free cash flow performance to be seasonally slower.
For 2024, Watts Water expects organic sales to be down 4% to increase 1%. The adjusted operating margin is estimated to be between 17.1% and 17.7%. The adjusted margin is expected to fall between 10 bps and 70 bps.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
Currently, Watts Water has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Watts Water has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Watts Water is part of the Zacks Instruments - Control industry. Over the past month, Woodward (WWD - Free Report) , a stock from the same industry, has gained 1.6%. The company reported its results for the quarter ended March 2024 more than a month ago.
Woodward reported revenues of $835.34 million in the last reported quarter, representing a year-over-year change of +16.3%. EPS of $1.62 for the same period compares with $1.01 a year ago.
For the current quarter, Woodward is expected to post earnings of $1.44 per share, indicating a change of +5.1% from the year-ago quarter. The Zacks Consensus Estimate has changed +2.7% over the last 30 days.
Woodward has a Zacks Rank #1 (Strong Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.
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Why Is Watts Water (WTS) Down 10.5% Since Last Earnings Report?
A month has gone by since the last earnings report for Watts Water (WTS - Free Report) . Shares have lost about 10.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Watts Water due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Watts Water Q1 Earnings Beat Estimates
Watts Water reported first-quarter 2024 adjusted earnings per share (EPS) of $2.33, which increased 21% on a year-over-year basis and beat the Zacks Consensus Estimate by 10.4%.
The company’s quarterly net sales rose 21% year over year to $570.9 million. The top line surpassed the Zacks Consensus Estimate by 3.5%. Organic sales were up 6% year over year.
The company’s performance benefited from higher revenue growth in the Asia-Pacific, the Middle East and Africa (APMEA) and America amid rising inflation.
Segment Results
Americas: Net sales rose 30% year over year to $419 million. Organic sales increased 11% due to extra shipping days, favorable prices and growth in core valve products. Adjusted operating margin decreased 40 basis points (bps) year over year to 22.1% due to inflation, higher investments and the dilutive impact of the Bradley acquisition, partly offset by increased price realization.
Europe: Net sales fell 4% year over year to $123 million, including a favorable foreign exchange impact of 1%. Organic sales were down 5% due to lower volumes in both fluid solutions. Adjusted operating margin was up 110 bps year over year to 15.7%, owing to favorable price-cost dynamic and product mix.
APMEA: Net sales increased 43% to $29 million. Organic sales moved up 6% from New Zealand, Australia and the Middle East. The unfavorable foreign exchange impact was 3%. Adjusted operating margin decreased 150 bps to 18.2% due to inflation and dilution from the Enware acquisition.
Other Details
Gross profit increased 22.7% year over year to $267.5 million. Selling, general and administrative expenses increased 26.9% year over year to $169.6 million. Operating income was $96.7 million, up 14.2% year over year.
GAAP operating margin decreased 110 bps to 16.9%. The adjusted operating margin was 18.2%, up 30 bps year over year.
Cash Flow & Liquidity
For the fiscal first quarter, Watts Water generated $45.6 million of cash from operating activities compared with $33.4 million in the prior-year period.
As of Mar 31, 2024, free cash flow was $36.6 million compared with $28.3 million in the year-ago period. The increase was due to higher net income and reduced working capital investment.
The company repurchased 23,000 shares for $4 million in the first quarter.
As of Mar 31, 2024, the company had $237.1 million in cash and cash equivalents with $283.5 million of long-term debt compared with the respective figures of $350.1 million and $298.2 million as of Dec 31, 2023.
Guidance
For second-quarter 2024, the company expects organic sales to decrease in the range of 1. The adjusted operating margin is estimated to be between 17.6% and 18.2%, while the adjusted margin is projected to decrease in the range of 160 bps-100 bps. The company expects the free cash flow performance to be seasonally slower.
For 2024, Watts Water expects organic sales to be down 4% to increase 1%. The adjusted operating margin is estimated to be between 17.1% and 17.7%. The adjusted margin is expected to fall between 10 bps and 70 bps.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
Currently, Watts Water has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Watts Water has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Watts Water is part of the Zacks Instruments - Control industry. Over the past month, Woodward (WWD - Free Report) , a stock from the same industry, has gained 1.6%. The company reported its results for the quarter ended March 2024 more than a month ago.
Woodward reported revenues of $835.34 million in the last reported quarter, representing a year-over-year change of +16.3%. EPS of $1.62 for the same period compares with $1.01 a year ago.
For the current quarter, Woodward is expected to post earnings of $1.44 per share, indicating a change of +5.1% from the year-ago quarter. The Zacks Consensus Estimate has changed +2.7% over the last 30 days.
Woodward has a Zacks Rank #1 (Strong Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.