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Watts Water (WTS) Up 2.7% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Watts Water (WTS - Free Report) . Shares have added about 2.7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Watts Water due for a pullback? 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 Q2 Earnings Beat Estimates
Watts Water reported second-quarter 2024 adjusted earnings per share (EPS) of $2.46, which increased 5% on a year-over-year basis and beat the Zacks Consensus Estimate by 5.1%.
The company’s quarterly net sales rose 12% year over year to $597.3 million. The top line surpassed the Zacks Consensus Estimate by 1.8%. Organic sales remained flat year over year.
The company’s performance benefited from higher revenue growth in the Asia-Pacific, the Middle East and Africa (APMEA) and the Americas amid sluggish market trends in the Europe region along with forex woes.
Segment Results
Americas: Net sales rose 22% year over year to $448 million. Organic sales increased 5%, driven by price realization and momentum in core valve products and heating and hot water products. Adjusted operating margin decreased 60 basis points (bps) year over year to 24.3% due to inflation, accretive investments and the dilutive impact of the Bradley acquisition, partly offset by increased price realization.
Europe: Net sales plunged 16% year over year to $114 million, which includes an unfavorable foreign exchange impact of 1%. Organic sales were down 15% due to lower volumes of fluid solutions products and reduced government energy incentives in key markets such as Germany and Italy. Adjusted operating margin was down 620 bps year over year to 10%, owing to inflation and volume deleverage, despite some benefits from price adjustments and improved product mix.
APMEA: Net sales increased 16% to $35 million. Organic sales moved up 18% on the back of successful projects across major countries in the segment. The unfavorable foreign exchange impact was 2%. Adjusted operating margin increased 70 bps to 18.9%, driven by volume leverage and productivity gains, which outweighed inflation, the dilutive impact of the Enware acquisition and accretive investments.
Other Details
Gross profit increased 12.6% year over year to $284.8 million. Selling, general and administrative expenses increased 14.8% to $173.1 million. Operating income was $111.5 million, up 11% year over year.
Operating margin decreased 10 bps to 18.7%. The adjusted operating margin was 18.8%, down 70 bps year over year.
Cash Flow & Liquidity
For the six months ended June 2024, Watts Water generated $131 million of cash from operating activities compared with $101 million in the prior-year period.
As of June 30, 2024, free cash flow was $120 million compared with $89 million in the year-ago period. This increase in free cash flow was driven by higher net income and lower working capital investment.
During the second quarter, Watts Water repurchased nearly 20,000 shares of worth $4.1 million. In the first half of 2024, the company repurchased a total of 40,000 shares worth $8.1 million.
As of June 30, 2024, the company had $279.4 million in cash and cash equivalents with $258.7 million of long-term debt compared with the respective figures of $237.1 million and $283.5 million as of Mar 31, 2024.
2024 Guidance Reiterated
The company anticipates reported sales to increase in the band of 7% to 12% for the fiscal year. Organic sales growth is expected to range from a decrease of 4% to an increase of 1%.
The full-year adjusted operating margin is projected to be between 17.1% and 17.7%, implying a decline of 70 bps to an improvement of 10 bps year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -6.46% due to these changes.
VGM Scores
At this time, Watts Water has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, 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 2.6%. The company reported its results for the quarter ended June 2024 more than a month ago.
Woodward reported revenues of $847.69 million in the last reported quarter, representing a year-over-year change of +5.9%. EPS of $1.63 for the same period compares with $1.37 a year ago.
Woodward is expected to post earnings of $1.20 per share for the current quarter, representing a year-over-year change of -9.8%. Over the last 30 days, the Zacks Consensus Estimate has changed -1.8%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Woodward. Also, the stock has a VGM Score of B.
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Watts Water (WTS) Up 2.7% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Watts Water (WTS - Free Report) . Shares have added about 2.7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Watts Water due for a pullback? 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 Q2 Earnings Beat Estimates
Watts Water reported second-quarter 2024 adjusted earnings per share (EPS) of $2.46, which increased 5% on a year-over-year basis and beat the Zacks Consensus Estimate by 5.1%.
The company’s quarterly net sales rose 12% year over year to $597.3 million. The top line surpassed the Zacks Consensus Estimate by 1.8%. Organic sales remained flat year over year.
The company’s performance benefited from higher revenue growth in the Asia-Pacific, the Middle East and Africa (APMEA) and the Americas amid sluggish market trends in the Europe region along with forex woes.
Segment Results
Americas: Net sales rose 22% year over year to $448 million. Organic sales increased 5%, driven by price realization and momentum in core valve products and heating and hot water products. Adjusted operating margin decreased 60 basis points (bps) year over year to 24.3% due to inflation, accretive investments and the dilutive impact of the Bradley acquisition, partly offset by increased price realization.
Europe: Net sales plunged 16% year over year to $114 million, which includes an unfavorable foreign exchange impact of 1%. Organic sales were down 15% due to lower volumes of fluid solutions products and reduced government energy incentives in key markets such as Germany and Italy. Adjusted operating margin was down 620 bps year over year to 10%, owing to inflation and volume deleverage, despite some benefits from price adjustments and improved product mix.
APMEA: Net sales increased 16% to $35 million. Organic sales moved up 18% on the back of successful projects across major countries in the segment. The unfavorable foreign exchange impact was 2%. Adjusted operating margin increased 70 bps to 18.9%, driven by volume leverage and productivity gains, which outweighed inflation, the dilutive impact of the Enware acquisition and accretive investments.
Other Details
Gross profit increased 12.6% year over year to $284.8 million. Selling, general and administrative expenses increased 14.8% to $173.1 million. Operating income was $111.5 million, up 11% year over year.
Operating margin decreased 10 bps to 18.7%. The adjusted operating margin was 18.8%, down 70 bps year over year.
Cash Flow & Liquidity
For the six months ended June 2024, Watts Water generated $131 million of cash from operating activities compared with $101 million in the prior-year period.
As of June 30, 2024, free cash flow was $120 million compared with $89 million in the year-ago period. This increase in free cash flow was driven by higher net income and lower working capital investment.
During the second quarter, Watts Water repurchased nearly 20,000 shares of worth $4.1 million. In the first half of 2024, the company repurchased a total of 40,000 shares worth $8.1 million.
As of June 30, 2024, the company had $279.4 million in cash and cash equivalents with $258.7 million of long-term debt compared with the respective figures of $237.1 million and $283.5 million as of Mar 31, 2024.
2024 Guidance Reiterated
The company anticipates reported sales to increase in the band of 7% to 12% for the fiscal year. Organic sales growth is expected to range from a decrease of 4% to an increase of 1%.
The full-year adjusted operating margin is projected to be between 17.1% and 17.7%, implying a decline of 70 bps to an improvement of 10 bps year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -6.46% due to these changes.
VGM Scores
At this time, Watts Water has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, 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 2.6%. The company reported its results for the quarter ended June 2024 more than a month ago.
Woodward reported revenues of $847.69 million in the last reported quarter, representing a year-over-year change of +5.9%. EPS of $1.63 for the same period compares with $1.37 a year ago.
Woodward is expected to post earnings of $1.20 per share for the current quarter, representing a year-over-year change of -9.8%. Over the last 30 days, the Zacks Consensus Estimate has changed -1.8%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Woodward. Also, the stock has a VGM Score of B.