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Watts Water Closes Unit Sale

Zacks Equity Research

Watts Water Technologies, Inc. (WTS) has completed the sale of all outstanding shares of an indirect wholly owned subsidiary, Watts Insulation GmbH. The transaction amount was approximately $9 million.

Watts Insulation – known as Austroflex before being acquired by Watts Water three years ago – is an Austria-based manufacturer of pre-insulated flexible pipe systems for heating and solar applications. The unit failed to meet performance expectations since its purchase, compelling Watts Water to dispose it.

The disposal will lead to a loss of about $2 million. Watts Insulation's performance will be presented as discontinued operations in the company’s forthcoming earnings release.

Watts Water reported second quarter 2013 adjusted earnings of 57 cents per share, up 10% from the year-ago quarter on higher sales in North America and Asia, cost reductions in North America as well as share repurchases. Earnings beat the Zacks Consensus Estimate of 55 cents by 4%. Total revenue nudged up 1% year over year to $371.3 million but fell short of the Zacks Consensus Estimate of $376 million.

Watts Water will be benefited by residential construction recovery. Its focus on expanding business and leveraging substantial market expansion opportunities in Asia will likely aid growth. However, economic weakness in Europe still remains an overhang on the company.

North Andover, Mass.-based Watts Water operates in the computer and technology sector through its subsidiaries. The company is a leading manufacturer of innovative products that control the efficiency, safety, and quality of water within applications (residential, commercial, and institutional). Its peers include Roper Industries Inc. (ROP), Badger Meter Inc. (BMI) and Nanometrics Incorporated (NANO).

Watts Water retains a Zacks Rank #3 (Hold).

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