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Watts Water (WTS) Q2 Earnings Beat Estimates, Revenues Up Y/Y
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Watts Water Technologies, Inc (WTS - Free Report) reported second-quarter 2023 adjusted earnings per share (EPS) of $2.34, which increased 11% on a year-over-year basis and beat the Zacks Consensus Estimate by 14.2%.
The company’s quarterly net sales rose 1% year over year to $532.8 million. The top line surpassed the Zacks Consensus Estimate by 0.5%. Organic sales were flat year over year.
The company’s performance benefited from higher revenue growth in Asia-Pacific, the Middle East and Africa (APMEA) and Europe amid rising inflation.
Watts Water Technologies, Inc. Price, Consensus and EPS Surprise
Americas: Net sales decreased 2% year over year to $367 million. Organic sales also decreased 2% due to tougher year-over-year comparisons. Adjusted operating income was up 210 basis points (bps) year over year to 24.9%, driven by increased price and productivity initiatives, partly offset by inflation and higher investments.
Europe: Net sales were up 6% year over year to $136 million, including a favorable foreign exchange impact of 1%. Organic sales were up 5%, owing to solid price realization. Adjusted operating income was down 10 bps year over year to 16.2%, owing to inflationary impact and reduced volume.
APMEA: Net sales increased 33% to $30 million. Organic sales moved up 5% from the Middle East and Australia. The unfavorable foreign exchange impact was 6%. Adjusted operating margin was up 250 bps to 18.2%, due to increased trade and affiliate sales volume, along with increased price and productivity.
Other Details
Gross profit increased 6% year over year to $252.8 million. Selling, general and administrative expenses decreased 6% year over year to $150.8 million. Operating income was $100.4 million, up 5% year over year.
GAAP operating margin was up 60 bps to 18.8%. The adjusted operating margin was 19.5%, up 100 bps year over year.
Cash Flow & Liquidity
For the six months that ended Jun 25, 2023, Watts Water generated $100.5 million of cash from operating activities compared with $44.9 million in the prior-year period.
For the six months that ended Jun 25, 2023, the free cash flow was $88.9 million compared with $32.6 million in the prior-year period. The increase was due to higher net income and reduced working capital investment.
The company repurchased 24,000 shares for $4 million in the second quarter. As of Jun 25, 2023, the company had $291.9 million in cash and cash equivalents with $98 million of long-term debt compared with the respective figures of $311.8 million and $147.8 million as of Mar 26, 2023.
Guidance
For third-quarter 2023, the company expects organic sales to decrease 3% to rise 1%. The adjusted operating margin is estimated to rise between 16% and 16.5%, with the adjusted margin projected to decline in the range of 80 bps-30 bps. The company expects the free cash flow performance to be positive.
For 2023, Watts Water expects organic sales to be down 2% to increase 2% compared with the previous guidance of down 5% to increase 2%. The adjusted operating margin is now estimated to be between 16.7% and 17.3% compared with the previous guidance of 15.7%-16.3%. The adjusted margin is expected to rise between 30 bps and 90 bps.
The Zacks Consensus Estimate for InterDigital’s 2023 EPS has increased 0.1% in the past 60 days to $8.08. The company’s long-term earnings growth rate is 13.9%.
InterDigital’s earnings beat estimates in all the trailing four quarters, delivering an average surprise of 170.9%. Shares of IDCC have rallied 53.9% in the past year.
The Zacks Consensus Estimate for Badger Meter’s 2023 EPS has increased 4.8% in the past 60 days to $2.82.
Badger Meter’s earnings beat the Zacks Consensus Estimate in all the last four quarters, the average being 6.7%. Shares of BMI have surged 80.5% in the past year.
The Zacks Consensus Estimate for Woodward’s fiscal 2023 EPS has increased 0.8% in the past 60 days to $3.61.
WWD’s long-term earnings growth rate is 13.5%. Shares of WWD have gained 20.2% in the past year.
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Watts Water (WTS) Q2 Earnings Beat Estimates, Revenues Up Y/Y
Watts Water Technologies, Inc (WTS - Free Report) reported second-quarter 2023 adjusted earnings per share (EPS) of $2.34, which increased 11% on a year-over-year basis and beat the Zacks Consensus Estimate by 14.2%.
The company’s quarterly net sales rose 1% year over year to $532.8 million. The top line surpassed the Zacks Consensus Estimate by 0.5%. Organic sales were flat year over year.
The company’s performance benefited from higher revenue growth in Asia-Pacific, the Middle East and Africa (APMEA) and Europe amid rising inflation.
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 decreased 2% year over year to $367 million. Organic sales also decreased 2% due to tougher year-over-year comparisons. Adjusted operating income was up 210 basis points (bps) year over year to 24.9%, driven by increased price and productivity initiatives, partly offset by inflation and higher investments.
Europe: Net sales were up 6% year over year to $136 million, including a favorable foreign exchange impact of 1%. Organic sales were up 5%, owing to solid price realization. Adjusted operating income was down 10 bps year over year to 16.2%, owing to inflationary impact and reduced volume.
APMEA: Net sales increased 33% to $30 million. Organic sales moved up 5% from the Middle East and Australia. The unfavorable foreign exchange impact was 6%. Adjusted operating margin was up 250 bps to 18.2%, due to increased trade and affiliate sales volume, along with increased price and productivity.
Other Details
Gross profit increased 6% year over year to $252.8 million. Selling, general and administrative expenses decreased 6% year over year to $150.8 million. Operating income was $100.4 million, up 5% year over year.
GAAP operating margin was up 60 bps to 18.8%. The adjusted operating margin was 19.5%, up 100 bps year over year.
Cash Flow & Liquidity
For the six months that ended Jun 25, 2023, Watts Water generated $100.5 million of cash from operating activities compared with $44.9 million in the prior-year period.
For the six months that ended Jun 25, 2023, the free cash flow was $88.9 million compared with $32.6 million in the prior-year period. The increase was due to higher net income and reduced working capital investment.
The company repurchased 24,000 shares for $4 million in the second quarter.
As of Jun 25, 2023, the company had $291.9 million in cash and cash equivalents with $98 million of long-term debt compared with the respective figures of $311.8 million and $147.8 million as of Mar 26, 2023.
Guidance
For third-quarter 2023, the company expects organic sales to decrease 3% to rise 1%. The adjusted operating margin is estimated to rise between 16% and 16.5%, with the adjusted margin projected to decline in the range of 80 bps-30 bps. The company expects the free cash flow performance to be positive.
For 2023, Watts Water expects organic sales to be down 2% to increase 2% compared with the previous guidance of down 5% to increase 2%. The adjusted operating margin is now estimated to be between 16.7% and 17.3% compared with the previous guidance of 15.7%-16.3%. The adjusted margin is expected to rise between 30 bps and 90 bps.
Zacks Rank & Other Stocks to Consider
Watts Water currently has a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader technology space are InterDigital (IDCC - Free Report) , Badger Meter (BMI - Free Report) and Woodward (WWD - Free Report) . Each of these companies presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for InterDigital’s 2023 EPS has increased 0.1% in the past 60 days to $8.08. The company’s long-term earnings growth rate is 13.9%.
InterDigital’s earnings beat estimates in all the trailing four quarters, delivering an average surprise of 170.9%. Shares of IDCC have rallied 53.9% in the past year.
The Zacks Consensus Estimate for Badger Meter’s 2023 EPS has increased 4.8% in the past 60 days to $2.82.
Badger Meter’s earnings beat the Zacks Consensus Estimate in all the last four quarters, the average being 6.7%. Shares of BMI have surged 80.5% in the past year.
The Zacks Consensus Estimate for Woodward’s fiscal 2023 EPS has increased 0.8% in the past 60 days to $3.61.
WWD’s long-term earnings growth rate is 13.5%. Shares of WWD have gained 20.2% in the past year.