HomeMost PopularInvestingWatts Water (WTS) Q1 Earnings Beat Estimates, Revenues Up Y/Y

Watts Water (WTS) Q1 Earnings Beat Estimates, Revenues Up Y/Y

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Watts Water Technologies, Inc WTS 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 companyโ€™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 companyโ€™s performance benefited from higher revenue growth in the Asia-Pacific, the Middle East and Africa (APMEA) and America amid rising inflation.

Watts Water Technologies, Inc. Price, Consensus and EPS Surprise

Watts Water Technologies, Inc. Price, Consensus and EPS Surprise

Watts Water Technologies, Inc. price-consensus-eps-surprise-chart | Watts Water Technologies, Inc. Quote

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%-5%. 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.

Zacks Rank & Other Stocks to Consider

Watts Water currently has a Zacks Rank #2 (Buy).

Some other top-ranked stocks from the broader technology space are Badger Meter BMI, Pinterest PINS and Arista Networks ANET. Badger Meter sports a Zacks Rank #1 (Strong Buy), whereas Pinterest and Arista Networks carry a Zacks Rank #2. You can see the complete list of todayโ€™s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Badger Meterโ€™s 2024 EPS has increased 9.9% in the past 60 days to $3.89. BMIโ€™s long-term earnings growth rate is 15.6%.

Badger Meterโ€™s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, delivering an average surprise of 12.7%. BMI shares have risen 35% in the past year.

The Zacks Consensus Estimate for PINSโ€™s 2024 EPS has increased 6.7% in the past 60 days to $1.43. PINSโ€™ long-term earnings growth rate is 23.4%.

Pinterestโ€™s earnings beat the Zacks Consensus Estimate in three of the last four quarters, delivering an average earnings surprise of 38.7%. Shares of PINS have gained 13.1% in the past year.

The Zacks Consensus Estimate for ANETโ€™s 2024 EPS has increased 0.9% in the past 60 days to $7.53. ANETโ€™s long-term earnings growth rate is 17.5%.

Arista Networksโ€™ earnings beat the Zacks Consensus Estimate in each of the last four quarters, delivering an average earnings surprise of 13.3%. Shares of ANET have gained 62.2% in the past year.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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