Watts Water (WTS) Jumps 18.9% YTD: Will the Uptrend Continue?
Watts Water Technologies WTS is witnessing strong momentum this year so far. The stock has improved 18.9% year to date compared with the sub-industry’s growth of 17.7% and S&P Composite’s gain of 12.5%. Watts Water currently carries a Zacks Rank #2 (Buy).
The company designs, manufactures and sells various water safety and flow control products for the water quality, water conservation, water safety and water flow control markets.
The increase in share price is driven by robust financial performance, which is benefiting from strong momentum in the Asia-Pacific region as well as healthy growth in Europe.
In the last reported quarter, sales from Asia-Pacific, the Middle East and Africa reported a 33% improvement to $30 million. In Europe, net sales were up 6% year over year to $136 million, including a favorable foreign exchange impact of 1%.
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WTS is likely to benefit from continued investment in smart and connected products, which are expected to provide further differentiation in the marketplace. Watts Water is focused on enhancing organic growth, driving margin expansion and reinvesting in productivity initiatives.
The company raised its adjusted operating margin outlook for 2023, driven by strong second-quarter results. Frequent product launches and synergies from the acquisition of Enware bode well.
In Aug 2023, management announced its plans to acquire Bradley Corporation for $303 million, which is subject to customary adjustments. The expected timeline for the deal's closure is fourth-quarter 2023.
Bradley Corporation’s high-quality and code-driven products are anticipated to complement Watts' existing portfolio and enable the provision of innovative water solutions. Both companies aim to leverage their combined sales networks for cross-selling opportunities and accelerated growth. Also, the acquisition strategically broadens Watts' reach in commercial and industrial markets, aligning with long-term trends such as water conservation, safety, regulation and energy efficiency.
A Look at Estimates
Watts Water’s earnings per share (EPS) are expected to increase 9.1% and 2.9% on a year-over-year basis to $7.78 and $8.01 in 2023 and 2024, respectively.
The Zacks Consensus Estimate for 2023 and 2024 earnings has risen 6.9% and 8.1%, respectively, in the past 60 days, reflecting analysts’ optimism.
Revenues are projected to improve 2.8% and 4.3% to $2.04 billion and $2.12 billion for 2023 and 2024, respectively.
Other Stocks to Consider
Some other top-ranked stocks in the broader technology space are Asure Software ASUR, Aspen Technology AZPN and Badger Meter BMI. Asure Software and Aspen Technology presently sport a Zacks Rank #1 (Strong Buy) each, whereas Badger Meter currently 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 Asure Software’s 2023 EPS has increased 35% in the past 60 days to 54 cents.
Asure Software’s earnings beat the Zacks Consensus Estimate in all the last four quarters, the average surprise being 676.4%. Shares of ASUR have surged 62.7% in the past year.
The Zacks Consensus Estimate for Aspen Technology’s fiscal 2024 EPS has gained 6.8% in the past 60 days to $6.58.
Aspen Technology’s long-term earnings growth rate is 17.1%. Shares of AZPN have declined 14.1% in the past year.
The Zacks Consensus Estimate for Badger Meter’s 2023 EPS has improved 1.4% in the past 60 days to $2.86.
Badger Meter’s earnings beat the Zacks Consensus Estimate in all the last four quarters, the average surprise being 6.7%. Shares of BMI have jumped 61.9% in the past year.
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