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Watts Water Technologies, Inc (WTS - Free Report) reported third-quarter 2022 adjusted earnings of $1.79 per share, which increased 29% on a year-over-year basis and beat the Zacks Consensus Estimate by 14%.
The company’s quarterly net sales rose 7% year over year to $488 million. The top line surpassed the consensus estimate by 2.5%. Organic sales increased 12% year over year.
Amid pandemic-induced supply chain woes, double-digit organic growth in the Americas and solid improvement in Asia boosted Watts Water’s third-quarter 2022 results. However, unfavorable forex translations affected sales by $21 million.
Watts Water Technologies, Inc. Price, Consensus and EPS Surprise
Americas: Net sales increased 13% year over year to $350 million. Organic sales also rose 13% on higher pricing across all major product lines. Adjusted operating income was up 380 basis points (bps) year over year to 21.9%, driven by increased price and productivity initiatives, which were partly offset by inflation and higher investments.
Europe: Net sales were down 9% year over year to $113 million, including an unfavorable foreign exchange impact of 15%. Organic sales were up 6%, with growth witnessed across all platforms, primarily driven by price actions. Adjusted operating income was down 320 bps year over year to 12.3%, owing to lower volume, inflationary impact and unfavorable forex volatility.
Asia-Pacific, Middle East and Africa: Net sales increased 14% to $25 million. Organic sales moved up 22% from growth in New Zealand, China and Australia. The unfavorable foreign exchange impact was 8%. Adjusted operating margin was down 260 bps to 16.5%, affected by lower affiliate volume and inflationary pressure.
Other Details
Gross profit increased 12.3% year over year to $217.9 million. Selling, general and administrative expenses increased 5.8% year over year to $135.8 million. Operating income was $80.4 million, up 24.3%.
GAAP operating margin was up 230 bps to 16.5%. The adjusted operating margin was 16.8%, up 240 bps.
Cash Flow & Liquidity
For nine months ended Sep 25, Watts Water generated $86.3 million of cash from operating activities compared with $134.9 million cash generated in the prior-year quarter.
Free cash flow was $67 million, down from $120.2 million reported in the year-ago quarter. The downtick stemmed from the company’s decision to boost inventories in response to a solid demand environment amid protracted supply chain challenges along with higher payments related to restructuring, employee and customer incentives.
The company repurchased 29,000 shares for $4 million in the third quarter. For the first nine months of 2022, the company repurchased 463,000 shares worth $65 million.
As of Sep 25, 2022, the company had $219.5 million in cash and cash equivalents with $182.4 million of long-term debt compared with the respective figures of $230 million and $202.2 million as of Jun 26.
Guidance
For fourth-quarter 2022, the company expects organic sales growth to be in the range of 5-8%. The adjusted operating margin is estimated to rise between 13.7% and 14.2%, with adjusted margin growth of 30-80 bps. The company expects operating cash flow and free cash flow performance to improve in the fourth quarter of 2022 due to normal seasonality.
For full-year 2022, Watts Water expects organic sales growth to be in the range of 11-12% compared with the earlier range of 8-11%. The adjusted operating margin is now estimated to be between 16.2% and 16.4%, with adjusted margin growth between 190 bps and 210 bps. Earlier, the company had guided the adjusted operating margin to be between 15.4% and 15.9%, with adjusted margin growth between 110 bps and 160 bps.
The Zacks Consensus Estimate for Pure Storage’s 2022 earnings is pegged at $1.18 per share, up 24.2% in the past 60 days. The long-term earnings growth rate is anticipated to be 35.5%.
Pure Storage’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 171.8%. Shares of PSTG have lost 12.9% in the past year.
The Zacks Consensus Estimate for Blackbaud’s 2022 earnings is pegged at $2.55 per share, unchanged in the past 60 days. The long-term earnings growth rate is anticipated to be 3%.
Blackbaud’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 4.9%. Shares of BLKB have lost 33.7% in the past year.
The Zacks Consensus Estimate for Cadence’s 2022 earnings is pegged at $4.22 per share, up 2.7% in the past 60 days. The long-term earnings growth rate is anticipated to be 17.7%.
CDNS’ earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average being 10.4%. Shares of CDNS have lost 19.2% in the past year.
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Watts Water's (WTS) Q3 Earnings & Revenues Top, Rise Y/Y
Watts Water Technologies, Inc (WTS - Free Report) reported third-quarter 2022 adjusted earnings of $1.79 per share, which increased 29% on a year-over-year basis and beat the Zacks Consensus Estimate by 14%.
The company’s quarterly net sales rose 7% year over year to $488 million. The top line surpassed the consensus estimate by 2.5%. Organic sales increased 12% year over year.
Amid pandemic-induced supply chain woes, double-digit organic growth in the Americas and solid improvement in Asia boosted Watts Water’s third-quarter 2022 results. However, unfavorable forex translations affected sales by $21 million.
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 increased 13% year over year to $350 million. Organic sales also rose 13% on higher pricing across all major product lines. Adjusted operating income was up 380 basis points (bps) year over year to 21.9%, driven by increased price and productivity initiatives, which were partly offset by inflation and higher investments.
Europe: Net sales were down 9% year over year to $113 million, including an unfavorable foreign exchange impact of 15%. Organic sales were up 6%, with growth witnessed across all platforms, primarily driven by price actions. Adjusted operating income was down 320 bps year over year to 12.3%, owing to lower volume, inflationary impact and unfavorable forex volatility.
Asia-Pacific, Middle East and Africa: Net sales increased 14% to $25 million. Organic sales moved up 22% from growth in New Zealand, China and Australia. The unfavorable foreign exchange impact was 8%. Adjusted operating margin was down 260 bps to 16.5%, affected by lower affiliate volume and inflationary pressure.
Other Details
Gross profit increased 12.3% year over year to $217.9 million. Selling, general and administrative expenses increased 5.8% year over year to $135.8 million. Operating income was $80.4 million, up 24.3%.
GAAP operating margin was up 230 bps to 16.5%. The adjusted operating margin was 16.8%, up 240 bps.
Cash Flow & Liquidity
For nine months ended Sep 25, Watts Water generated $86.3 million of cash from operating activities compared with $134.9 million cash generated in the prior-year quarter.
Free cash flow was $67 million, down from $120.2 million reported in the year-ago quarter. The downtick stemmed from the company’s decision to boost inventories in response to a solid demand environment amid protracted supply chain challenges along with higher payments related to restructuring, employee and customer incentives.
The company repurchased 29,000 shares for $4 million in the third quarter. For the first nine months of 2022, the company repurchased 463,000 shares worth $65 million.
As of Sep 25, 2022, the company had $219.5 million in cash and cash equivalents with $182.4 million of long-term debt compared with the respective figures of $230 million and $202.2 million as of Jun 26.
Guidance
For fourth-quarter 2022, the company expects organic sales growth to be in the range of 5-8%. The adjusted operating margin is estimated to rise between 13.7% and 14.2%, with adjusted margin growth of 30-80 bps. The company expects operating cash flow and free cash flow performance to improve in the fourth quarter of 2022 due to normal seasonality.
For full-year 2022, Watts Water expects organic sales growth to be in the range of 11-12% compared with the earlier range of 8-11%. The adjusted operating margin is now estimated to be between 16.2% and 16.4%, with adjusted margin growth between 190 bps and 210 bps. Earlier, the company had guided the adjusted operating margin to be between 15.4% and 15.9%, with adjusted margin growth between 110 bps and 160 bps.
Zacks Rank & Stocks to Consider
Watts Water currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks from the broader technology space are Pure Storage (PSTG - Free Report) , Blackbaud (BLKB - Free Report) and Cadence Design Systems (CDNS - Free Report) . All stocks presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Pure Storage’s 2022 earnings is pegged at $1.18 per share, up 24.2% in the past 60 days. The long-term earnings growth rate is anticipated to be 35.5%.
Pure Storage’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 171.8%. Shares of PSTG have lost 12.9% in the past year.
The Zacks Consensus Estimate for Blackbaud’s 2022 earnings is pegged at $2.55 per share, unchanged in the past 60 days. The long-term earnings growth rate is anticipated to be 3%.
Blackbaud’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 4.9%. Shares of BLKB have lost 33.7% in the past year.
The Zacks Consensus Estimate for Cadence’s 2022 earnings is pegged at $4.22 per share, up 2.7% in the past 60 days. The long-term earnings growth rate is anticipated to be 17.7%.
CDNS’ earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average being 10.4%. Shares of CDNS have lost 19.2% in the past year.