Watts Water's (WTS) Solid Acquisition Strategy to Drive Growth
Watts Water Technologies WTS is expanding its business through strategic acquisitions.
WTS specializes in designing, manufacturing and distribution of various water safety and flow control products for water quality, water conservation, water safety and water flow control markets.
The company is also gaining from strengthening momentum in the Asia-Pacific region as well as healthy growth in Europe. Continued investment in smart and connected-enabled products bodes well.
WTS recently announced the completion of the acquisition of Josam Company. The buyout was funded using cash in hand.
Watts Water has not divulged any financial details of the deal at present but added that it will provide more information regarding the same on its fourth-quarter 2023 earnings call in February 2024.
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Headquartered in Michigan City, IN, Josam specializes in designing and manufacturing drainage and plumbing products. It has a varied customer base serving commercial, industrial and multi-family end markets. The company’s annualized sales are nearly $35 million, per WTS.
With the acquisition of Josam, management added that it will be able to offer its clients a wide array of capabilities and solutions. Josam’s complementary sales networks and channel relationships are expected to drive future growth and provide cross-selling opportunities for WTS.
Strategic acquisitions are aiding the company’s top-line growth. In October 2023, Watts Water completed the acquisition of Bradley Corporation for $303 million. Bradley Corporation’s high-quality and code-driven products are likely to complement Watts Water’s existing portfolio and enable the provision of innovative water solutions.
Both companies aim to leverage combined sales networks for cross-selling opportunities and accelerated growth. Also, the buyout strategically broadens WTS’ reach in commercial and industrial markets, aligning with long-term trends such as water conservation, safety, regulation and energy efficiency.
In April 2023, the firm completed the acquisition of Enware Australia to expand its global footprint. With this, Australia and New Zealand now represent more than half of the APMEA region revenues, noted WTS.
Share Price Movement & Estimates
Shares of WTS have outperformed its industry in the past year. The company’s shares have gained 40.8% compared with the sub-industry’s and S&P Composite’s growth of 26.6% and 24.5%, respectively.
Watts Water’s earnings per share (EPS) are expected to rise 13.3% and 3% on a year-over-year basis to $8.08 and $8.33 in 2023 and 2024, respectively. It has a long term earnings growth rate of 7.8%.
The Zacks Consensus Estimate for 2023 and 2024 EPS has gained 3.5% and 3.9%, respectively, in the past 60 days, reflecting analysts’ optimism.
WTS reported better-than-expected earnings performance in each of the four trailing quarters, the average surprise being 11.8%.
Revenues are projected to improve 3% and 10.1% to $2.04 billion and $2.25 billion for 2023 and 2024, respectively.
Zacks Rank & Other Key Picks
At present, Watts Water carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks worth consideration in the broader technology space are Cadence Design Systems CDNS, NETGEAR NTGR and Blackbaud BLKB. While NETGEAR sports a Zacks Rank #1 (Strong Buy), Cadence and Blackbaud carry a Zacks Rank #2 each. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Cadence’s 2023 EPS has remained unchanged in the past 60 days at $5.10. CDNS’ long-term earnings growth rate is 17.9%.
Cadence’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 4.1%. Shares of CDNS have gained 64.4% in the past year.
The Zacks Consensus Estimate for 2023 is pegged at a loss of 9 cents per share for NETGEAR, which remained unchanged in the past 30 days. NTGR’s earnings outpaced the Zacks Consensus Estimate in three of the last four quarters while missing once. The average surprise was 127.5%. Shares of NTGR were down 22.7% in the past year.
The Zacks Consensus Estimate for Blackbaud’s 2023 EPS has improved by 1.3% in the past 60 days to $3.86.
BLKB’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 10.6%. Shares of BLKB have jumped 41.3% in the past year.
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