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Watts Water (WTS) Hits 52-Week High On Strong Q2 Results

ByZacks Investment Research
Published 08/12/2016, 12:03 AM
Updated 07/09/2023, 06:31 AM

Shares of Watts Water Technologies, Inc. (NYSE:WTS) scaled a 52-week high of $65.61 on Aug 11, before settling at $65.45. The high came on the back of the company’s record second-quarter 2016 earnings.

The stock boasts a year-to-date return of 28.05%. The average volume of shares traded over the last three months was roughly 141K.

The company, which manufactures and sells an extensive line of products to the water quality and water regulation and control markets, has a market cap of $2.24 billion. Watts Water has effectively beaten the Zacks Consensus Estimate in all the trailing four quarters, with an average surprise of 9.70%.

WATTS WATER TEC Price and Consensus

WATTS WATER TEC Price and Consensus | WATTS WATER TEC Quote

Growth Drivers

Watts Water’s share price has been on the rise since it reported sturdy second-quarter results on Aug 5. Adjusted earnings for the quarter improved 8.7% year over year to 75 cents per share on the back of robust operating performance. Expanded operating margins resulting from increased volume and productivity, including sourcing, transformation and restructuring actions, led to the record earnings.

Watts Water expects organic sales growth excluding shipping days in second-half 2016 to remain fairly consistent with the first half, at approximately 3%. It also anticipates attaining full-year operating margin expansion of 100 plus basis points, with the potential for some upside. Also, Watts Water projects an improvement in free cash flow during the second half of 2016.

By region, the Americas should see persistent growth from relatively stable end markets. The company remains cautious about EMEA, given recent events and certain tougher comparisons in the fourth quarter. Therefore, it forecasts flat growth for the region in the second half of the year. Also, the company expects Asia-Pacific sales to accelerate in the back half of the year as the China valve business recovers and sustained growth is marked in countries outside of China.

The company is poised to gain from transformation initiatives in the Americas and EMEA. Consistent focus on acquisitions, growth in operational efficiencies and further share repurchases will also help boost results. It is persistently looking for strategic opportunities to invest in new products and markets or divest existing product lines. Moreover, optimism regarding non-residential and residential market bodes well for Watts Water’s growth.

Watts Water currently has a Zacks Rank #2 (Buy).

Stocks to Consider

Other stocks worth considering in the sector include Columbus McKinnon Corporation (NASDAQ:CMCO) , Gorman-Rupp Co. (NYSE:GRC) and Tennant Company (NYSE:TNC) . All three stocks sport a Zacks Rank #1 (Strong Buy).

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WATTS WATER TEC (WTS): Free Stock Analysis Report

TENNANT CO (TNC): Free Stock Analysis Report

GORMAN RUPP CO (GRC): Free Stock Analysis Report

COLUMBUS MCKINN (CMCO): Free Stock Analysis Report

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