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Watts Water Technologies, Inc. (NYSE:WTS) defied analyst predictions to release its third-quarter results, which were ahead of market expectations. Watts Water Technologies beat earnings, with revenues hitting US$384m, ahead of expectations, and statutory earnings per share outperforming analyst reckonings by a solid 10%. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Following last week's earnings report, Watts Water Technologies' seven analysts are forecasting 2021 revenues to be US$1.52b, approximately in line with the last 12 months. Per-share earnings are expected to ascend 11% to US$3.81. Before this earnings report, the analysts had been forecasting revenues of US$1.53b and earnings per share (EPS) of US$3.79 in 2021. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
With the analysts reconfirming their revenue and earnings forecasts, it's surprising to see that the price target rose 5.0% to US$104. It looks as though they previously had some doubts over whether the business would live up to their expectations. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Watts Water Technologies analyst has a price target of US$123 per share, while the most pessimistic values it at US$80.00. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that Watts Water Technologies' revenue growth is expected to slow, with forecast 1.0% increase next year well below the historical 2.2%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 7.3% next year. Factoring in the forecast slowdown in growth, it seems obvious that Watts Water Technologies is also expected to grow slower than other industry participants.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Watts Water Technologies analysts - going out to 2024, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Watts Water Technologies that you should be aware of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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