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Why Is Watts Water (WTS) Down 6.2% Since the Last Earnings Report?
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It has been about a month since the last earnings report for Watts Water Technologies, Inc. (WTS - Free Report) . Shares have lost about 6.2% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Watts Water Beats on Q4 Earnings; Revenues Lag
Watts Water reported fourth-quarter 2016 adjusted earnings of $0.64 per share, an 8.5% year-over-year improvement driven by a strong operating performance. Earnings came in line with the Zacks Consensus Estimate.
On a reported basis, including special items, Watts Water’s earnings were $0.51 per share in the quarter, a reversal from a loss per share of $3.41 in the year-ago quarter.
Total revenue dipped 5% year over year to $342 million in the quarter, falling short of the Zacks Consensus Estimate of $348 million. Organic sales were flat in the quarter compared with the year-ago quarter.
Organic sales were flat in the Americas, affected by anticipated headwinds in the retail channel, which offset growth in the company’s core plumbing and valves product lines. Organic sales edged down 1% in Europe, impacted by lower demand in larger geographical markets. Organic sales climbed18% in the Asia-Pacific region, aided by consistent growth in the residential markets in China and the commercial markets outside China.
Cost and Margins
Cost of sales declined 8.7% year over year to $204 million. Gross profit increased 2.3% to $137.7 million. Gross margin in the reported quarter expanded 270 basis points (bps) to 40.3%. Selling, general and administrative expenses went down 5.5% to $106.5 million from $112.7 million in the prior-year quarter.
Adjusted operating profit went up 5% to $37.2 million in the reported quarter. Adjusted operating margin advanced 100 bps to 10.9% driven primarily by strong productivity resulting from the company’s transformation initiatives.
Segment Performance
Americas: Net sales declined 4.3% to $223.3 million in the reported quarter. Adjusted operating profit increased 2.7% to $34.2 million.
EMEA: Net sales decreased 8% year over year to $104 million. Adjusted operating profit went down 13.7% to $8.8 million from $10.2 million in the prior-year quarter.
Asia-Pacific: Net sales jumped 25.9% to $14.6 million from $11.6 million in the year-earlier quarter. The segment reported adjusted operating profit of $2.1 million compared to $0.7 million in the year-ago quarter.
Financial Performance
Watts Water reported cash and cash equivalents of $338.4 million at the end of 2016, up from $296 million as of Dec 31, 2015. At the end of 2016, long-term debt was approximately $511 million, down from $574 million as of Dec 31, 2015.
In 2016, the company delivered $138 million of operating cash flow compared with $109 million in 2015. Watts Water repurchased 68,000 shares of Class A common stock for $4 million during the quarter. For 2016, approximately 501,000 shares were purchased at a cost of approximately $27 million. Roughly $56 million remains available under the company’s current authorization, which has no expiration date.
2016 Performance
Watts Water posted adjusted earnings of $2.67 per share for 2016, up 10.8% year over year. Earnings beat the Zacks Consensus Estimate of $2.66. On a reported basis, including special items, Watts Water’s earnings were $2.44 per share in the quarter, a reversal from a loss per share of $3.24 in the year-ago quarter.
Revenues for full-year 2016 went down 5% year over year to $1.4 billion. Revenues came in line with the Zacks Consensus Estimate.
The company continued to focus on realigning its business teams and product platforms, getting closer to customers, executing itsrestructuring initiatives and re-investing for future growth. It also expanded solutions offering for commercial boiler room applications with the acquisition of PVI Industries. Watts Water expects its efforts in 2016 will drive growth. It also foresees margin expansion moving ahead.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. There have been three downward revisions for the current quarter. In the past month, the consensus estimate has shifted downward by 10.53% due to these changes.
Watts Water Technologies, Inc. Price and Consensus
At this time, Watts Water's stock has a great Growth Score of 'A', though it is lagging a lot on the momentum front with a 'D'. However, the stock was allocated also a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for growth investors than those looking for value.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. It's no surprise the stock has a Zacks Rank #4 (Sell). We are expecting a below average return from the stock in the next few months.
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Why Is Watts Water (WTS) Down 6.2% Since the Last Earnings Report?
It has been about a month since the last earnings report for Watts Water Technologies, Inc. (WTS - Free Report) . Shares have lost about 6.2% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Watts Water Beats on Q4 Earnings; Revenues Lag
Watts Water reported fourth-quarter 2016 adjusted earnings of $0.64 per share, an 8.5% year-over-year improvement driven by a strong operating performance. Earnings came in line with the Zacks Consensus Estimate.
On a reported basis, including special items, Watts Water’s earnings were $0.51 per share in the quarter, a reversal from a loss per share of $3.41 in the year-ago quarter.
Total revenue dipped 5% year over year to $342 million in the quarter, falling short of the Zacks Consensus Estimate of $348 million. Organic sales were flat in the quarter compared with the year-ago quarter.
Organic sales were flat in the Americas, affected by anticipated headwinds in the retail channel, which offset growth in the company’s core plumbing and valves product lines. Organic sales edged down 1% in Europe, impacted by lower demand in larger geographical markets. Organic sales climbed18% in the Asia-Pacific region, aided by consistent growth in the residential markets in China and the commercial markets outside China.
Cost and Margins
Cost of sales declined 8.7% year over year to $204 million. Gross profit increased 2.3% to $137.7 million. Gross margin in the reported quarter expanded 270 basis points (bps) to 40.3%. Selling, general and administrative expenses went down 5.5% to $106.5 million from $112.7 million in the prior-year quarter.
Adjusted operating profit went up 5% to $37.2 million in the reported quarter. Adjusted operating margin advanced 100 bps to 10.9% driven primarily by strong productivity resulting from the company’s transformation initiatives.
Segment Performance
Americas: Net sales declined 4.3% to $223.3 million in the reported quarter. Adjusted operating profit increased 2.7% to $34.2 million.
EMEA: Net sales decreased 8% year over year to $104 million. Adjusted operating profit went down 13.7% to $8.8 million from $10.2 million in the prior-year quarter.
Asia-Pacific: Net sales jumped 25.9% to $14.6 million from $11.6 million in the year-earlier quarter. The segment reported adjusted operating profit of $2.1 million compared to $0.7 million in the year-ago quarter.
Financial Performance
Watts Water reported cash and cash equivalents of $338.4 million at the end of 2016, up from $296 million as of Dec 31, 2015. At the end of 2016, long-term debt was approximately $511 million, down from $574 million as of Dec 31, 2015.
In 2016, the company delivered $138 million of operating cash flow compared with $109 million in 2015. Watts Water repurchased 68,000 shares of Class A common stock for $4 million during the quarter. For 2016, approximately 501,000 shares were purchased at a cost of approximately $27 million. Roughly $56 million remains available under the company’s current authorization, which has no expiration date.
2016 Performance
Watts Water posted adjusted earnings of $2.67 per share for 2016, up 10.8% year over year. Earnings beat the Zacks Consensus Estimate of $2.66. On a reported basis, including special items, Watts Water’s earnings were $2.44 per share in the quarter, a reversal from a loss per share of $3.24 in the year-ago quarter.
Revenues for full-year 2016 went down 5% year over year to $1.4 billion. Revenues came in line with the Zacks Consensus Estimate.
The company continued to focus on realigning its business teams and product platforms, getting closer to customers, executing itsrestructuring initiatives and re-investing for future growth. It also expanded solutions offering for commercial boiler room applications with the acquisition of PVI Industries. Watts Water expects its efforts in 2016 will drive growth. It also foresees margin expansion moving ahead.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. There have been three downward revisions for the current quarter. In the past month, the consensus estimate has shifted downward by 10.53% due to these changes.
Watts Water Technologies, Inc. Price and Consensus
Watts Water Technologies, Inc. Price and Consensus | Watts Water Technologies, Inc. Quote
VGM Scores
At this time, Watts Water's stock has a great Growth Score of 'A', though it is lagging a lot on the momentum front with a 'D'. However, the stock was allocated also a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for growth investors than those looking for value.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. It's no surprise the stock has a Zacks Rank #4 (Sell). We are expecting a below average return from the stock in the next few months.