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Watts Water (WTS) Q1 Earnings & Revenues Top Estimates, Up Y/Y

·4 min read

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 and EPS Surprise
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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