Watts Water (WTS) Q1 Earnings & Revenues Top Estimates, Up Y/Y
Watts Water Technologies, Inc WTS reported adjusted earnings of 1.63 per share in first-quarter 2022, which increased 31% on a year-over-year basis and beat the Zacks Consensus Estimate by 17.3%.
The company’s quarterly net sales rose 12% year over year to $463.2 million. The top line surpassed the consensus estimate by 4.4%. Organic sales increased 14% year over year.
Amid pandemic-induced supply chain woes, double-digit organic growth in all regions and increased productivity initiatives boosted Watts Water’s performance.
Segment Results
Americas: Net sales increased 15% year over year to $314 million. Organic sales rose 14% on the back of double-digit growth across all major product lines. Acquisitions contributed 1% to the segment’s top line. Adjusted operating income was up 70 bps year over year to 18.5%, driven by increased price, volume and productivity initiatives.
Watts Water Technologies, Inc. Price, Consensus and EPS Surprise
Watts Water Technologies, Inc. price-consensus-eps-surprise-chart | Watts Water Technologies, Inc. Quote
Europe: Net sales moved up 6% year over year to $130 million, including an unfavorable foreign exchange impact of 8%. Organic sales were up 14%, with growth in the Fluid Solutions and Drains platforms. Adjusted operating income was up 120 bps year over year to 17.1%, driven by increased price, volume and productivity initiatives.
Asia-Pacific, Middle East and Africa: Net sales increased 10% to $19.4 million. Organic sales moved up 13% from growth in all major regions. Adjusted operating margin was up 30 bps to 14.8%, benefiting from volume and productivity initiatives amid inflationary pressure.
Other Details
Gross profit increased 14.3% year over year to $198.6 million. Operating income was $71.5 million, up 20%. Selling, general and administrative expenses increased 10.8% year over year to $126.1 million in the prior-year quarter.
GAAP operating margin was up 100 bps to 15.4%. The adjusted operating margin was 15.7%, up 120 bps.
The company repurchased 293,000 shares for nearly $42.9 million during the first quarter.
Cash Flow & Liquidity
In the first quarter, Watts Water used $2 million of cash from operating activities compared with $33.9 million of cash generated in the prior-year quarter.
Free cash out flow was $7.6 million, down from $31.9 million of free cash flow reported in the previous year quarter. The downtick stemmed from the company’s decision to boost inventories in response to a solid demand environment amid protracted supply chain challenges.
As of Mar 27, 2022, the company had $226.8 million in cash and cash equivalents with $202 million of long-term debt compared with the respective tallies of $242 million and $141.9 million as of Dec 31, 2021.
Outlook
For second-quarter 2022, the company expects organic sales growth to be in the range of 5-10%. The adjusted operating margin is estimated to rise between 15.1% and 15.5%, with adjusted margin growth of 20-60 bps.
For full-year 2022, Watts Water expects organic sales growth to be in the range of 3-8%. The adjusted operating margin is now estimated to be between 14.5% and 14.9%, with adjusted margin growth of between 20 bps and 60 bps. Earlier, the company had guided the adjusted operating margin to be between 14.3% and 14.7%, with adjusted margin growth of between 0 bps and 40 bps.
Zacks Rank & Stocks to Consider
Watts Water currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks from the broader technology sector are Flex FLEX, Jabil JBL and Broadcom AVGO. Flex and Jabil sport a Zacks Rank #1 (Strong Buy), while Broadcom carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Flex’s fiscal 2022 earnings is pegged at $1.88 per share, unchanged in the past 60 days. The long-term earnings growth rate is pegged at 14.9%.
Flex earnings beat the Zacks Consensus Estimate all last four quarters, with the average being 25.6%. Shares of FLEX have declined 2.3% in the past year.
The Zacks Consensus Estimate for Jabil fiscal 2022 earnings is pegged at $7.25 per share, up 10.2% in the past 60 days. The long-term earnings growth rate is 12%.
Jabil earnings beat the Zacks Consensus Estimate all last four quarters, with the average being 13.5%. Shares of JBL have gained 12.5% in the past year.
The Zacks Consensus Estimate for Broadcom’s fiscal 2022 earnings is pegged at $35.67 per share, up 1.1% in the past 60 days. AVGO’s long-term earnings growth rate is pegged at 15.6%.
Broadcom’s earnings beat the Zacks Consensus Estimate in all the preceding four quarters, with the average being 1.9%. Shares of AVGO have increased 31% in the past year.
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