We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Watts Water (WTS) Up 12.9% Since Last Earnings Report: Can It Continue?
Read MoreHide Full Article
It has been about a month since the last earnings report for Watts Water (WTS - Free Report) . Shares have added about 12.9% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important drivers.
Watts Water Q3 Earnings Beat Estimates
Watts Water reported third-quarter 2024 adjusted earnings per share (EPS) of $2.03 compared with $2.04 in the prior-year quarter. The bottom line topped the Zacks Consensus Estimate by 2%.
The company’s quarterly net sales rose 8% year over year to $543.6 million. The top line surpassed the Zacks Consensus Estimate by 0.9%. Organic sales were down 9% year over year.
Higher revenue growth in the Asia-Pacific, the Middle East and Africa (APMEA) and the Americas contributed to the company's performance despite economic headwinds and soft European results.
Segment Results
Americas: Net sales rose 14% year over year to $400 million, while organic sales dipped 3%. Synergies from the Bradley and Josam acquisitions contributed $59 million to total sales, marking 17% growth. Organic sales were slightly down due to adjustments in project timelines and inventory management in the wholesale channel as lead times normalized. Adjusted operating margin decreased 260 basis points (bps) year over year to 21.9% due to inflation, accretive investments and the dilutive impact of the Bradley acquisition, partly offset by increased price realization.
Europe: Net sales plunged 11% year over year to $107 million. Favorable forex movements added a modest 1% to reported sales. Organic sales were down 12% due to challenges within the fluid solutions product line, especially in the OEM channel, where government incentives for energy projects were reduced and heat pumps destocking. Adjusted operating margin was up 20 bps year over year to 10.6% due to favorable product mix and productivity initiatives, which helped to counterbalance inflationary impacts and volume challenges.
APMEA: Net sales increased 10% to $36 million and 8% organically. Key growth drivers included strong demand across China, New Zealand and the Middle East, offset by a slight sales dip in Australia. Favorable forex movements further enhanced reported sales by 2%. Adjusted operating margin expanded 130 bps to 18.5%, driven by volume leverage and productivity initiatives, which counteracted inflationary pressures, acquisition-related dilution from Enware and accretive investments.
Other Details
Gross profit increased 9.6% year over year to $257.1 million. Selling, general and administrative expenses increased 8.2% to $159 million. Operating income was $93.2 million, up 7% year over year.
Operating margin decreased 20 bps to 17.1%. The adjusted operating margin was 17.1%, down 90 bps year over year.
Cash Flow & Liquidity
For the nine months that ended Sept. 29, 2024, Watts Water generated $221.6 million of cash from operating activities compared with $200.9 million in the prior-year period.
For the nine months that ended Sept. 29, 2024, free cash flow was $204.2 million compared with $181.9 million in the year-ago period. The increase was due to acquisitions, which strengthened the company's overall cash flow profile.
The company repurchased 26,000 shares for $4.9 million in the third quarter.
As of Sept. 29, 2024, the company had $303.9 million in cash and cash equivalents with $211.8 million of long-term debt compared with the respective figures of $279.4 million and $258.7 million as of June 30, 2024. Management expects normal seasonal trends to lead to strong operating cash flow and free cash flow in the fourth quarter.
2024 Guidance Revised
The company has adjusted its full-year financial outlook, raising the midpoint of its operating margin forecast by 20 bps and narrowing its sales guidance. Reported sales are expected to grow 9% to 10%, with organic sales anticipated to decline 1% to 2%. The projected full-year operating margin is between 17.2% and 17.4%, while the adjusted operating margin is expected to be between 17.5% and 17.7%, reflecting a decrease of 10-30 bps.
Earlier, it anticipated reported sales to increase in the band of 7-12% for the fiscal year. Organic sales growth was expected to range from a decrease of 4% to an increase of 1%. The full-year adjusted operating margin was 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?
It turns out, fresh estimates flatlined during the past month.
VGM Scores
Currently, 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
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 belongs to the Zacks Instruments - Control industry. Another stock from the same industry, Badger Meter (BMI - Free Report) , has gained 8.2% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.
Badger Meter reported revenues of $208.44 million in the last reported quarter, representing a year-over-year change of +12%. EPS of $1.08 for the same period compares with $0.88 a year ago.
For the current quarter, Badger Meter is expected to post earnings of $1 per share, indicating a change of +19.1% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
Badger Meter has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Watts Water (WTS) Up 12.9% 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 12.9% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important drivers.
Watts Water Q3 Earnings Beat Estimates
Watts Water reported third-quarter 2024 adjusted earnings per share (EPS) of $2.03 compared with $2.04 in the prior-year quarter. The bottom line topped the Zacks Consensus Estimate by 2%.
The company’s quarterly net sales rose 8% year over year to $543.6 million. The top line surpassed the Zacks Consensus Estimate by 0.9%. Organic sales were down 9% year over year.
Higher revenue growth in the Asia-Pacific, the Middle East and Africa (APMEA) and the Americas contributed to the company's performance despite economic headwinds and soft European results.
Segment Results
Americas: Net sales rose 14% year over year to $400 million, while organic sales dipped 3%. Synergies from the Bradley and Josam acquisitions contributed $59 million to total sales, marking 17% growth. Organic sales were slightly down due to adjustments in project timelines and inventory management in the wholesale channel as lead times normalized. Adjusted operating margin decreased 260 basis points (bps) year over year to 21.9% due to inflation, accretive investments and the dilutive impact of the Bradley acquisition, partly offset by increased price realization.
Europe: Net sales plunged 11% year over year to $107 million. Favorable forex movements added a modest 1% to reported sales. Organic sales were down 12% due to challenges within the fluid solutions product line, especially in the OEM channel, where government incentives for energy projects were reduced and heat pumps destocking. Adjusted operating margin was up 20 bps year over year to 10.6% due to favorable product mix and productivity initiatives, which helped to counterbalance inflationary impacts and volume challenges.
APMEA: Net sales increased 10% to $36 million and 8% organically. Key growth drivers included strong demand across China, New Zealand and the Middle East, offset by a slight sales dip in Australia. Favorable forex movements further enhanced reported sales by 2%. Adjusted operating margin expanded 130 bps to 18.5%, driven by volume leverage and productivity initiatives, which counteracted inflationary pressures, acquisition-related dilution from Enware and accretive investments.
Other Details
Gross profit increased 9.6% year over year to $257.1 million. Selling, general and administrative expenses increased 8.2% to $159 million. Operating income was $93.2 million, up 7% year over year.
Operating margin decreased 20 bps to 17.1%. The adjusted operating margin was 17.1%, down 90 bps year over year.
Cash Flow & Liquidity
For the nine months that ended Sept. 29, 2024, Watts Water generated $221.6 million of cash from operating activities compared with $200.9 million in the prior-year period.
For the nine months that ended Sept. 29, 2024, free cash flow was $204.2 million compared with $181.9 million in the year-ago period. The increase was due to acquisitions, which strengthened the company's overall cash flow profile.
The company repurchased 26,000 shares for $4.9 million in the third quarter.
As of Sept. 29, 2024, the company had $303.9 million in cash and cash equivalents with $211.8 million of long-term debt compared with the respective figures of $279.4 million and $258.7 million as of June 30, 2024. Management expects normal seasonal trends to lead to strong operating cash flow and free cash flow in the fourth quarter.
2024 Guidance Revised
The company has adjusted its full-year financial outlook, raising the midpoint of its operating margin forecast by 20 bps and narrowing its sales guidance. Reported sales are expected to grow 9% to 10%, with organic sales anticipated to decline 1% to 2%. The projected full-year operating margin is between 17.2% and 17.4%, while the adjusted operating margin is expected to be between 17.5% and 17.7%, reflecting a decrease of 10-30 bps.
Earlier, it anticipated reported sales to increase in the band of 7-12% for the fiscal year. Organic sales growth was expected to range from a decrease of 4% to an increase of 1%. The full-year adjusted operating margin was 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?
It turns out, fresh estimates flatlined during the past month.
VGM Scores
Currently, 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
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 belongs to the Zacks Instruments - Control industry. Another stock from the same industry, Badger Meter (BMI - Free Report) , has gained 8.2% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.
Badger Meter reported revenues of $208.44 million in the last reported quarter, representing a year-over-year change of +12%. EPS of $1.08 for the same period compares with $0.88 a year ago.
For the current quarter, Badger Meter is expected to post earnings of $1 per share, indicating a change of +19.1% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
Badger Meter has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.