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Watts Water (WTS) Earnings & Revenues Beat Estimates in Q2

Watts Water Technologies, Inc.WTS delivered second-quarter 2018 adjusted earnings of $1.05 per share, up 26.5% year over year. The improvement was driven by strong operating performance in the Americas. Earnings also surpassed the Zacks Consensus Estimate of $1.01.

On a reported basis, Watts Water's earnings per share improved 33% to $1.05 in the second quarter compared with 79 cents in the year-ago quarter. In the quarter, a lower effective tax rate, lower non-operating expenses as well as a favorable foreign exchange had a positive impact on the earnings.

Watts Water Technologies, Inc. Price, Consensus and EPS Surprise

Watts Water Technologies, Inc. Price, Consensus and EPS Surprise | Watts Water Technologies, Inc. Quote

Total revenues were up 8% year over year to $407.9 million in the reported quarter on the back of solid productivity initiatives. Notably, it beat the Zacks Consensus Estimate of $402 million. Organic sales were up 5% year over year.

Regionally, organic sales improved 8% in the Americas, driven by continued growth in plumbing, water quality as well as heating and hot water products. Organic sales decreased 2% in Europe owing to decline in water, plumbing and HVAC products. APMEA's organic sales went up 5%.

Cost and Margins

Cost of sales went up 7.5% year over year to $238.5 million. Gross profit increased 8.1% to $169.4 million. Gross margin in the reported quarter expanded 10 basis points to 41.5%. Selling, general and administrative expenses were up to $117.2 million from $110.2 million posted in the prior-year quarter. Adjusted operating profit jumped 16.5% to $52.2 million in the reported quarter.

Segmental Performance

Americas: Net sales increased 8.6% to $272 million in the reported quarter. Adjusted operating profit increased 18% to $46.7 million.

Europe: Net sales were up 5.8% year over year to $117.1 million. The segment reported adjusted operating profit of $12.9 million compared with $12.7 million recorded in the year-ago quarter.

APMEA: Net sales went up 8.7% year over year to $18.8 million. Adjusted operating profit came in at $1.6 million compared with $1.8 million recorded in the year-ago quarter.

Financial Performance

Watts Water reported cash and cash equivalents of $142.6 million at the end of the second quarter, down from $280.2 million recorded at the end of 2017. Net cash provided by operating activities came in at $1.5 million at the end of the second quarter compared with $9 million a year ago.

Net debt was at $266.6 million as of Jul 1, 2018, up from $216.9 million as of Dec 31, 2017. Consequently, the net debt-to-capitalization ratio increased to 23.7% as of Jul 1, 2018 from 20.7% as of Dec 31, 2017.

The company repurchased around 59,000 shares of Class A common stock for $4.5 million during the second quarter.

Zacks Rank & Stocks to Consider

Watts Water currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same space are Woodward, Inc. WWD , Transcat, Inc. TRNS and AMETEK, Inc. AME . While Woodward sports a Zacks Rank #1 (Strong Buy), Transcat and AMETEK carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Woodward surpassed estimates thrice in the trailing four quarters with an average beat of 2.44%.

Transcat exceeded estimates thrice in the trailing four quarters with an average beat of 26.04%.

AMETEK surpassed estimates in each of the trailing four quarters with an average beat of 6.42%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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