Watts Water Technologies, Inc.'
) second-quarter 2013 adjusted earnings increased 10% year over
year to 57 cents per share, driven by higher sales in North
America and Asia, cost reductions in North America as well as
share repurchases. Earnings beat the Zacks Consensus Estimate of
55 cents by 4%.
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On a reported basis, including special items, earnings in the
quarter were 53 cents per share compared with 50 cents in the
Total revenue edged up 1% year over year to $371.3 million,
falling short of the Zacks Consensus Estimate of $376 million.
Organic sales growth in North America and Asia were offset by a
reduction in Europe, Middle East and Africa (EMEA).
Cost and Margins
Cost of sales remained flat at $238 million in the quarter. Gross
profit increased 3% to $133.7 million. Consequently, gross margin
expanded 50 basis points (bps) to 36% in the quarter. Selling,
general and administrative expenses remained flat at $96 million.
Adjusted operating profit increased 9% to $37.6 million and
adjusted operating margin expanded 70 bps to 10.1%.
North America: Net sales went up 3% to $224 million, aided by
organic sales growth of 3%; partially offset by unfavorable
foreign currency translation with the weakening of the Canadian
dollar against the U.S. dollar. Operating profit increased 20% to
$31 million in the quarter.
EMEA: Net sales were $139 million, down 3% on a year-over-year
basis as positive impact of foreign currency translation was
offset by lower organic sales. The segment reported an operating
profit of $9.8 million, down 18% from the year-ago operating
income of $12 million.
Asia: Net sales increased 28% to $8 million in the quarter.
Operating profit increased 14% to $2.4 million from $2.1 million
in the prior-year quarter, driven by an organic sales increase of
26.2% relating to residential valve and heating products.
Cash and cash equivalents were $182 million as of Jun 30, 2013
compared with $272 million as of Dec 31, 2012. Cash flow from
operations for the quarter was $21 million in the first half of
2013 compared with $23 million in the prior-year period.
Long-term debt, excluding current portion, amounted to $306
million as of Jun 30, 2013 compared with $307 million as of Dec
31, 2012. Net debt-to-capitalization ratio increased to 11.7% as
of Jun 30, 2013, compared with 10.7% as of Dec 31, 2012.
During the quarter, Watts Water repurchased 2.2 million shares
for $10 million as part of the $90 million share repurchase
program announced in April.
Watts Water has made strategic investments in both people and
systems and lead-free conversion program in North America. Even
though it has affected near-term results, it is expected to lead
to improved margins in the long term. The company will benefit
from the residential construction recovery that seems imminent in
the U.S. Its focus on expanding its business and leveraging the
substantial market expansion opportunities in Asia will add to
its growth profile. However, weak economic condition in Europe is
still a headwind for the company.
Watts Water, through its subsidiaries, is a leading manufacturer
of innovative products that control the efficiency, safety, and
quality of water within applications (residential, commercial,
and institutional). Watts Water retains a Zacks Rank #4 (Sell).
Roper Industries Inc.
) reported earnings of $1.31 per share, up 13.9% from the
year-ago quarter and beat the Zacks Consensus Estimate by a
Badger Meter Inc.
) reported first-quarter earnings per share of 44 cents, a 15.4%
decline from 52 cents earned in the year-ago quarter and was well
short of the Zacks Consensus Estimate of 55 cents.
On the other hand,
) reported first-quarter loss per share of 17 cents, narrower
than the year-ago quarter's loss per share of 22 cents and the
Zacks Consensus Estimate of a loss per share of 19 cents.