Yahoo Finance Watts Water (WTS) Q1 Earnings Beat Estimates, Revenues Up Y/Y
Watts Water Technologies, Inc WTS reported first-quarter 2023 adjusted earnings of $1.92 per share, which increased 18% on a year-over-year basis and beat the Zacks Consensus Estimate by 17.8%.
The company’s quarterly net sales rose 2% year over year to $471.7 million. The top line missed the Zacks Consensus Estimate by 0.6%. Organic sales increased 4% year over year.
The company’s performance benefited from higher revenue growth in Asia-Pacific, the Middle East and Africa (APMEA) and the Americas amid rising inflation. However, unfavorable forex translations affected sales by $9 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 3% year over year to $323 million. Organic sales also rose 3% on higher pricing across all major product lines. Adjusted operating income was up 400 basis points (bps) year over year to 22.5%, driven by increased price and productivity initiatives, partly offset by inflation and higher investments.
Europe: Net sales were down 1% year over year to $128 million, including an unfavorable foreign exchange impact of 5%. Organic sales were up 4%, with growth witnessed across plumbing and heating, ventilation and air conditioning products, offset partly by weakness in drains products. Adjusted operating income was down by 250 bps year over year to 14.6%, owing to inflationary impact and reduced volume.
APMEA: Net sales increased 4% to $20 million. Organic sales moved up 11% from China, the Middle East and Australia. The unfavorable foreign exchange impact was 7%. Adjusted operating margin was up 490 bps to 19.7%, owing to increased trade and affiliate sales volume, along with increased price and productivity.
Other Details
Gross profit increased 10% year over year to $218.1 million. Selling, general and administrative expenses increased 6% year over year to $133.7 million. Operating income was $84.7 million, up 18%.
GAAP operating margin was up 260 bps to 18%. The adjusted operating margin was 17.9%, up 220 bps.
Cash Flow & Liquidity
For the year that ended Mar 26, 2023, Watts Water generated $33.4 million of cash from operating activities compared with $2 million used in the previous year.
The free cash flow was $28.3 million compared with the free cash outflow of $7.6 million in the previous year’s quarter. The increase was due to higher net income and reduced working capital investment.
The company repurchased 22,000 shares for $3.7 million in the first quarter.
As of Mar 26, 2023, the company had $311.8 million in cash and cash equivalents with $147.8 million of long-term debt compared with the respective figures of $310.8 million and $147.6 million as of Dec 31, 2022.
Guidance
For second-quarter 2023, the company expects organic sales to decrease 4% to remain flat. The adjusted operating margin is estimated to rise between 17.2% and 17.8%, with the adjusted margin to be down between 130 bps and 70 bps. The company expects the free cash flow performance to be weak due to seasonality.
The company’s performance in the second quarter is likely to benefit from the acquisition of Enware, an Australian-based supplier of specialty plumbing and safety equipment.
For 2023, Watts Water expects organic sales to be down 5% to increase 2%. The adjusted operating margin is now estimated to be between 15.7% and 16.3%, with the adjusted margin to be down between 10 bps and 70 bps.
Zacks Rank & Stocks to Consider
Watts Water currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology space are Arista Networks ANET, Badger Meter BMI and Enfusion ENFN. Badger Meter and Enfusion currently sport a Zacks Rank #1 (Strong Buy), whereas Arista Networks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Arista Networks’ 2023 earnings has increased 0.3% in the past 60 days to $5.81 per share. The long-term earnings growth rate is anticipated to be 14.2%.
Arista Networks’ earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 14.7%. Shares of ANET have increased 29% in the past year.
The Zacks Consensus Estimate for Badger Meter’s 2023 earnings has increased 4.7% in the past 60 days to $2.69 per share.
Badger Meter’s earnings beat the Zacks Consensus Estimate in all the last four quarters, the average being 5.3%. Shares of BMI have increased 122.4% in the past year.
The Zacks Consensus Estimate for Enfusion’s 2023 earnings has increased 5.6% in the past 60 days to 19 cents per share.
Enfusion’s earnings beat the Zacks Consensus Estimate in two of the last four quarters, the average surprise being 18.8%. Shares of the company have increased 3.2% in the past year.
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