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Watts Water Technologies, Inc.

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Watts Water’s first-quarter 2018 adjusted earnings and revenues both improved on a year-over-year basis and also beat the respective Zacks Consensus Estimate. This improvement was driven by strong volume, productivity, a lower tax rate and favorable foreign exchange. For 2018, the company expects its organic sales to increase around 3% and operating margin to expand between 50 and 70 basis points for the year due to higher volume and pricing actions. Additionally, restructuring benefits will drive margin performance in 2018. Further, Watts Water’s focus on new product innovation will drive growth. Moreover, the company will benefit in 2018 from the U.S. tax reform. The stock has outperformed the industry over the past year. However, material cost inflation, incremental investments and product rationalizations costs will weigh on margins in the near term.

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