Watts Water Technologies, Inc. (WTS - Free Report) delivered second-quarter 2018 adjusted earnings of $1.05 per share, up 26.5% year over year. The improvement was driven by strong operating performance in the Americas. Earnings also surpassed the Zacks Consensus Estimate of $1.01.
On a reported basis, Watts Water’s earnings per share improved 33% to $1.05 in the second quarter compared with 79 cents in the year-ago quarter. In the quarter, a lower effective tax rate, lower non-operating expenses as well as a favorable foreign exchange had a positive impact on the earnings.
Total revenues were up 8% year over year to $407.9 million in the reported quarter on the back of solid productivity initiatives. Notably, it beat the Zacks Consensus Estimate of $402 million. Organic sales were up 5% year over year.
Regionally, organic sales improved 8% in the Americas, driven by continued growth in plumbing, water quality as well as heating and hot water products. Organic sales decreased 2% in Europe owing to decline in water, plumbing and HVAC products. APMEA’s organic sales went up 5%.
Cost and Margins
Cost of sales went up 7.5% year over year to $238.5 million. Gross profit increased 8.1% to $169.4 million. Gross margin in the reported quarter expanded 10 basis points to 41.5%. Selling, general and administrative expenses were up to $117.2 million from $110.2 million posted in the prior-year quarter. Adjusted operating profit jumped 16.5% to $52.2 million in the reported quarter.
Americas: Net sales increased 8.6% to $272 million in the reported quarter. Adjusted operating profit increased 18% to $46.7 million.
Europe: Net sales were up 5.8% year over year to $117.1 million. The segment reported adjusted operating profit of $12.9 million compared with $12.7 million recorded in the year-ago quarter.
APMEA: Net sales went up 8.7% year over year to $18.8 million. Adjusted operating profit came in at $1.6 million compared with $1.8 million recorded in the year-ago quarter.
Watts Water reported cash and cash equivalents of $142.6 million at the end of the second quarter, down from $280.2 million recorded at the end of 2017. Net cash provided by operating activities came in at $1.5 million at the end of the second quarter compared with $9 million a year ago.
Net debt was at $266.6 million as of Jul 1, 2018, up from $216.9 million as of Dec 31, 2017. Consequently, the net debt-to-capitalization ratio increased to 23.7% as of Jul 1, 2018 from 20.7% as of Dec 31, 2017.
The company repurchased around 59,000 shares of Class A common stock for $4.5 million during the second quarter.
Zacks Rank & Stocks to Consider
Watts Water currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the same space are Woodward, Inc. (WWD - Free Report) , Transcat, Inc. (TRNS - Free Report) and AMETEK, Inc. (AME - Free Report) . While Woodward sports a Zacks Rank #1 (Strong Buy), Transcat and AMETEK carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Woodward surpassed estimates thrice in the trailing four quarters with an average beat of 2.44%.
Transcat exceeded estimates thrice in the trailing four quarters with an average beat of 26.04%.
AMETEK surpassed estimates in each of the trailing four quarters with an average beat of 6.42%.
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