Watts Water Technologies, Inc. (NYSE:WTS) delivered fourth-quarter 2017 adjusted earnings of 74 cents per share, up 16% year over year. The improvement was driven by strong operating performances in the Americas and Europe. Earnings also surpassed the Zacks Consensus Estimate of 73 cents.
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Watts Water Technologies, Inc. (WTS): Free Stock Analysis Report
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Zacks Investment Research
On a reported basis, including special items, Watts Water reported a loss of 7 cents per share in the quarter against earnings per share of 51 cents in the year-ago quarter.
Total revenues were up 7% year over year to $366 million in the quarter. It came ahead of the Zacks Consensus Estimate of $364 million. Organic sales went up 3% year over year.
Regionally, organic sales improved 3% in the Americas driven by growth in plumbing, drains along with water quality products. Organic sales growth improved 5% in Europe owing to continued strength in drains business and solid growth in water and plumbing products. APMEA’s organic sales suffered a decline of 1% due to planned product rationalization, which negatively affected sales by 10%.
Watts Water Technologies, Inc. Price, Consensus and EPS Surprise
Watts Water Technologies, Inc. Price, Consensus and EPS Surprise
Cost and Margins
Cost of sales edged went up 6.3% year over year to $217 million. Gross profit increased 8% to $149 million. Gross margin in the reported quarter expanded 40 basis points (bps) to 40.7%. Selling, general and administrative expenses went up to $108 million from $107 million in the prior-year quarter. Adjusted operating profit surged 34% to $41.7 million in the reported quarter.
Segment Performance
Americas: Net sales increased 4.6% to $233.6 million in the reported quarter. Adjusted operating profit increased 11% to $37.8 million.
Europe: Net sales increased 13.8% year over year to $115.7 million. The segment reported adjusted operating profit of $11.8 million compared with $8.9 million recorded in the year-ago quarter.
APMEA: Net sales remained flat year over year at $17 million. Adjusted operating profit declined 30% year over year to $1.4 million.
Financial Performance
Watts Water had cash and cash equivalents of $280.2 million at the end of 2017 compared with $338.4 million at the end of 2016. The company recorded cash from operations of $156 million in 2017 compared with $138 million recorded last year.
The company repurchased 63,000 shares of Class A common stock for $4.6 million during the fourth quarter. In 2017, the company repurchased approximately 278,000 shares at a cost of approximately $18 million. Approximately $38 million remains available for stock repurchases.
Net debt was at $216.9 million as of Dec 31, 2017, lower than $312 million as of Dec 31, 2016. Consequently, net debt-to-capitalization ratio slumped to 20.7% as of Dec 31, 2017 from 29.8% as of Dec 31, 2016.
Fiscal 2017 Performance
Watts Water’s adjusted earnings came in at $3.02 in fiscal 2017 that beat the Zacks Consensus Estimate of $3.01. Earnings increased 13% year over year. Including special items, Watts Water reported earnings per share of $2.12 per share in 2017 compared with $2.44 in the prior year. Total revenues increased 4% year over year to $1.46 billion in 201 and also surpassed the Zacks Consensus Estimate of $1.45 billion.
Share Price Performance
In the past year, Watts Water has outperformed the industry with respect to price performance. The stock gained 16.6%, while the industry recorded growth of 14.3%.
The company has successfully completed its transformation efforts. The company has started to realize the expected benefits of portfolio rationalization, footprint optimization and global sourcing while simultaneously reinvesting for future growth. With completion of these efforts, the company will now focus on reinvigorating growth through new product development, geographic expansion and key account management. These initiatives are anticipated to deliver top-line growth and margin expansion in 2018.
Zacks Rank and Key Picks
Watts Water currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the same industry include Badger Meter, Inc. (NYSE:BMI) , Aspen Technology, Inc. (NASDAQ:AZPN) and DST Systems, Inc. (NYSE:DST) . All these stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Badger Meter has delivered an average positive earnings surprise of 1.02% in the trailing four quarters. The stock has gained 32% in the past year.
Aspen Technology has an average positive earnings surprise of 33.7% in the trailing four quarters. The company’s shares have gained 29% in the past year.
DST Systems delievered an average positive earnings surprise of 33.7% in the trailing four quarters. The company’s shares have gained 41% in the past year.
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DST Systems, Inc. (DST): Free Stock Analysis Report
Aspen Technology, Inc. (AZPN): Free Stock Analysis Report
Badger Meter, Inc. (BMI): Free Stock Analysis Report
Watts Water Technologies, Inc. (WTS): Free Stock Analysis Report
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