Watts Water Technologies, Inc. (WTS - Free Report) delivered first-quarter 2018 adjusted earnings of 82 cents per share, up 26% year over year. This improvement was driven by strong volume, productivity, a lower tax rate and favorable foreign exchange. Earnings also surpassed the Zacks Consensus Estimate of 79 cents.
On a reported basis, Watts Water’s earnings per share improved 30% to 82 cents in the first quarter compared to 63 cents posted in the year-ago quarter. Notably, prior-year quarter includes acquisition, restructuring and transformation costs while reported quarter does not have any such adjustments.
Total revenues were up 9% year over year to $379 million in the first quarter, on the back of solid productivity initiatives. It beat the Zacks Consensus Estimate of $363 million. Organic sales were up 3% year over year.
Regionally, organic sales improved 5% in the Americas, driven by growth in plumbing, drains, boiler and water quality products. Organic sales growth increased 2% in Europe owing to continued strength in drains business. APMEA’s organic sales went up 3%.
Cost and Margins
Cost of sales went up 9% year over year to $222 million. Gross profit increased 9% year over year to $157 million. Gross margin in the reported quarter remained flat year over year at 41%. Selling, general and administrative expenses flared up to $112.8 million from $107.6 million posted in the prior-year quarter. Adjusted operating profit jumped 21% to $43.9 million in the reported quarter.
Segment Performance
Americas: Net sales increased 5% to $241 million in the reported quarter. Adjusted operating profit increased 8% to $36.4 million.
Europe: Net sales were up 17% year over year to $123 million. The segment reported adjusted operating profit of $14.9 million compared with $12.6 million recorded in the year-ago quarter.
APMEA: Net sales went up 5.9% year over year to $14 million. Adjusted operating profit jumped 40% year over year to $1.4 million.
Financial Performance
Watts Water reported cash and cash equivalents of $185 million at the end of the first quarter, down from $280 million recorded at the end of 2017. The company used $26 million of cash in operating activities during the quarter compared with cash usage of $9 million posted in the prior-year period.
Net debt was at $261.9 million as of Apr 1, 2018, up from $216.9 million as of Dec 31, 2017. Consequently, the net debt-to-capitalization ratio increased to 23.4% as of Apr 1, 2018 from 20.7% as of Dec 31, 2017.
The company repurchased around 80,000 shares of Class A common stock for $6.2 million during the first quarter.
Share Price Performance
Over the past year, Watts Water has underperformed the industry with respect to price performance. The stock has gained 12%, while the industry recorded growth of 17%.
Zacks Rank and Key Picks
Watts Water currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the same sector include Nanometrics Incorporated , Allied Motion Technologies, Inc. and Sensata Technologies Holding N.V. (ST - Free Report) . While Nanometrics sports a Zacks Rank #1 (Strong Buy), Allied Motion and Sensata Technologies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Nanometrics has a long-term earnings growth rate of 12%. The stock has appreciated 19% in a year’s time.
Allied Motion has a long-term earnings growth rate of 16%. The company’s shares have been up 70% during the past year.
Sensata Technologies has a long-term earnings growth rate of 10.7%. Its shares have rallied 24% over the past year.
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Watts Water Technologies, Inc. (WTS - Free Report) delivered first-quarter 2018 adjusted earnings of 82 cents per share, up 26% year over year. This improvement was driven by strong volume, productivity, a lower tax rate and favorable foreign exchange. Earnings also surpassed the Zacks Consensus Estimate of 79 cents.
On a reported basis, Watts Water’s earnings per share improved 30% to 82 cents in the first quarter compared to 63 cents posted in the year-ago quarter. Notably, prior-year quarter includes acquisition, restructuring and transformation costs while reported quarter does not have any such adjustments.
Total revenues were up 9% year over year to $379 million in the first quarter, on the back of solid productivity initiatives. It beat the Zacks Consensus Estimate of $363 million. Organic sales were up 3% year over year.
Regionally, organic sales improved 5% in the Americas, driven by growth in plumbing, drains, boiler and water quality products. Organic sales growth increased 2% in Europe owing to continued strength in drains business. APMEA’s organic sales went up 3%.
Cost and Margins
Cost of sales went up 9% year over year to $222 million. Gross profit increased 9% year over year to $157 million. Gross margin in the reported quarter remained flat year over year at 41%. Selling, general and administrative expenses flared up to $112.8 million from $107.6 million posted in the prior-year quarter. Adjusted operating profit jumped 21% to $43.9 million in the reported quarter.
Segment Performance
Americas: Net sales increased 5% to $241 million in the reported quarter. Adjusted operating profit increased 8% to $36.4 million.
Europe: Net sales were up 17% year over year to $123 million. The segment reported adjusted operating profit of $14.9 million compared with $12.6 million recorded in the year-ago quarter.
APMEA: Net sales went up 5.9% year over year to $14 million. Adjusted operating profit jumped 40% year over year to $1.4 million.
Financial Performance
Watts Water reported cash and cash equivalents of $185 million at the end of the first quarter, down from $280 million recorded at the end of 2017. The company used $26 million of cash in operating activities during the quarter compared with cash usage of $9 million posted in the prior-year period.
Net debt was at $261.9 million as of Apr 1, 2018, up from $216.9 million as of Dec 31, 2017. Consequently, the net debt-to-capitalization ratio increased to 23.4% as of Apr 1, 2018 from 20.7% as of Dec 31, 2017.
The company repurchased around 80,000 shares of Class A common stock for $6.2 million during the first quarter.
Share Price Performance
Over the past year, Watts Water has underperformed the industry with respect to price performance. The stock has gained 12%, while the industry recorded growth of 17%.
Zacks Rank and Key Picks
Watts Water currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the same sector include Nanometrics Incorporated , Allied Motion Technologies, Inc. and Sensata Technologies Holding N.V. (ST - Free Report) . While Nanometrics sports a Zacks Rank #1 (Strong Buy), Allied Motion and Sensata Technologies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Nanometrics has a long-term earnings growth rate of 12%. The stock has appreciated 19% in a year’s time.
Allied Motion has a long-term earnings growth rate of 16%. The company’s shares have been up 70% during the past year.
Sensata Technologies has a long-term earnings growth rate of 10.7%. Its shares have rallied 24% over the past year.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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