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Watts Water's (WTS) Q3 Earnings Beat on Cost Reductions
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Watts Water Technologies, Inc. (WTS - Free Report) reported decent third-quarter 2020 results, wherein the top and the bottom lines beat the respective Zacks Consensus Estimate.
Net Income
On a reported basis, quarterly net income was $32.9 million or 97 cents per share compared with $32.3 million or 94 cents per share in the year-ago quarter. The improvement was supported by cost reductions and lower provision for income tax.
Adjusted net income came in at $35.6 million or $1.05 per share compared with $35.6 million or $1.04 per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 16 cents, delivering a positive surprise of 18%.
Watts Water Technologies, Inc. Price, Consensus and EPS Surprise
On a reported basis, quarterly net sales slipped 2.7% year over year to $383.9 million, primarily due to COVID-19-led volume reductions. Nevertheless, the top line surpassed the consensus estimate of $362 million. Organic sales decreased 5% year over year.
Segment Results
Americas: Net sales fell 3.3% year over year to $261.5 million. Organic sales declined 4% due to a fall in heating and hot water, plumbing and drains products. Adjusted operating income fell 1.4% to $48.2 million.
Europe: Net sales declined 1.1% year over year to $106.7 million, including a positive impact of 5% from foreign exchange movements. Organic sales were down 6%, with declines in most regions and product lines resulting from COVID-19. Adjusted operating income was $12.1 million, stable year over year. This was positively impacted by cost reduction actions and productivity initiatives.
APMEA: Net sales declined 4.8% to $15.7 million. Organic sales decreased 22%, with sales generally down in most regions due to the pandemic. Adjusted operating income came in at $2.4 million compared with $1.4 million in the prior-year quarter. The improvement was driven by cost reduction actions and productivity initiatives as well as higher affiliate volume, which were partly offset by lower third-party volume.
Other Details
Cost of goods sold was $225.4 million compared with $226.1 million in the year-ago quarter. Gross profit declined to $158.5 million from $168.6 million. Reported operating income was $47.9 million, down 1.8%. GAAP operating margin was up 10 basis points (bps) to 12.5%. Adjusted operating margin was 13.8%, up 50 bps.
The company incurred $3.4 million in restructuring and other related costs. It repurchased about 41,000 shares for $3.7 million during the third quarter.
Cash Flow & Liquidity
In the first nine months of 2020, Watts Water generated $127.4 million of net cash from operating activities compared with $94.9 million in the year-ago period. For the same period, free cash flow was $95.1 million compared with $75.9 million a year ago. As of Sep 27, the company had $188.3 million in cash and cash equivalents with $247.9 million of long-term debt (net of current portion).
Zacks Rank & Other Stocks to Consider
Watts Water currently carries a Zacks Rank #2 (Buy).
Transcat delivered a trailing four-quarter positive earnings surprise of 93.4%, on average. The company’s earnings beat the Zacks Consensus Estimate in three of the last four quarters.
Sensata delivered a trailing four-quarter positive earnings surprise of 6.7%, on average. The company’s earnings beat the consensus estimate in three of the last four quarters.
Badger Meter delivered a trailing four-quarter positive earnings surprise of 5.4%, on average. The company’s earnings beat the consensus estimate in two of the last four quarters.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
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Watts Water's (WTS) Q3 Earnings Beat on Cost Reductions
Watts Water Technologies, Inc. (WTS - Free Report) reported decent third-quarter 2020 results, wherein the top and the bottom lines beat the respective Zacks Consensus Estimate.
Net Income
On a reported basis, quarterly net income was $32.9 million or 97 cents per share compared with $32.3 million or 94 cents per share in the year-ago quarter. The improvement was supported by cost reductions and lower provision for income tax.
Adjusted net income came in at $35.6 million or $1.05 per share compared with $35.6 million or $1.04 per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 16 cents, delivering a positive surprise of 18%.
Watts Water Technologies, Inc. Price, Consensus and EPS Surprise
Watts Water Technologies, Inc. price-consensus-eps-surprise-chart | Watts Water Technologies, Inc. Quote
Revenues
On a reported basis, quarterly net sales slipped 2.7% year over year to $383.9 million, primarily due to COVID-19-led volume reductions. Nevertheless, the top line surpassed the consensus estimate of $362 million. Organic sales decreased 5% year over year.
Segment Results
Americas: Net sales fell 3.3% year over year to $261.5 million. Organic sales declined 4% due to a fall in heating and hot water, plumbing and drains products. Adjusted operating income fell 1.4% to $48.2 million.
Europe: Net sales declined 1.1% year over year to $106.7 million, including a positive impact of 5% from foreign exchange movements. Organic sales were down 6%, with declines in most regions and product lines resulting from COVID-19. Adjusted operating income was $12.1 million, stable year over year. This was positively impacted by cost reduction actions and productivity initiatives.
APMEA: Net sales declined 4.8% to $15.7 million. Organic sales decreased 22%, with sales generally down in most regions due to the pandemic. Adjusted operating income came in at $2.4 million compared with $1.4 million in the prior-year quarter. The improvement was driven by cost reduction actions and productivity initiatives as well as higher affiliate volume, which were partly offset by lower third-party volume.
Other Details
Cost of goods sold was $225.4 million compared with $226.1 million in the year-ago quarter. Gross profit declined to $158.5 million from $168.6 million. Reported operating income was $47.9 million, down 1.8%. GAAP operating margin was up 10 basis points (bps) to 12.5%. Adjusted operating margin was 13.8%, up 50 bps.
The company incurred $3.4 million in restructuring and other related costs. It repurchased about 41,000 shares for $3.7 million during the third quarter.
Cash Flow & Liquidity
In the first nine months of 2020, Watts Water generated $127.4 million of net cash from operating activities compared with $94.9 million in the year-ago period. For the same period, free cash flow was $95.1 million compared with $75.9 million a year ago. As of Sep 27, the company had $188.3 million in cash and cash equivalents with $247.9 million of long-term debt (net of current portion).
Zacks Rank & Other Stocks to Consider
Watts Water currently carries a Zacks Rank #2 (Buy).
Other top-ranked stocks in the industry include Transcat, Inc. (TRNS - Free Report) , Sensata Technologies Holding plc (ST - Free Report) and Badger Meter, Inc. (BMI - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Transcat delivered a trailing four-quarter positive earnings surprise of 93.4%, on average. The company’s earnings beat the Zacks Consensus Estimate in three of the last four quarters.
Sensata delivered a trailing four-quarter positive earnings surprise of 6.7%, on average. The company’s earnings beat the consensus estimate in three of the last four quarters.
Badger Meter delivered a trailing four-quarter positive earnings surprise of 5.4%, on average. The company’s earnings beat the consensus estimate in two of the last four quarters.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
See the 5 high-tech stocks now>>