Watts Water Technologies, Inc. (WTS – Free Report) is a stock that investors may consider adding to their portfolio to combat the highly volatile market environment and take advantage of its upside potential. The company currently has a Zacks Rank no. 2 (Buy). you can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Why WTS is an attractive option
Watts Water has an impressive history of earnings surprises. The company beat estimates in all four subsequent quarters, with an average earnings surprise of 14.9%. The stock has a long-term earnings per share (EPS) growth expectation of 8%.
The Zacks Consensus Estimate for 2022 earnings of $6.58 per share suggests growth of roughly 19.2% from year-ago levels. For 2023, the consensus earnings mark is set at $6.64, indicating a year-over-year increase of 0.9%. On the revenue side, the consensus estimate is pegged at $1.94 billion and $1.98 billion, indicating an increase of 7.4% and 1.9%, respectively.
In the last reported quarter, Watts Water posted 2Q2022 adjusted earnings of 2.11 per share, up 43% year-over-year and beating the Zacks Consensus Estimate by 29.5%. The company’s quarterly net sales rose 13% year over year to $527 million. The top line beat the consensus estimate by 7.8%. Organic sales were up 16% year over year. Amid pandemic-induced supply chain issues, double-digit organic growth in the Americas and synergies from acquisitions boosted Watts Water’s performance.
Buoyed by strong second-quarter results, the company raised its outlook for 2022. For the full year 2022, Watts Water expects organic sales growth to be in the range of 8-11% compared to previous range of 3-8%. Adjusted operating margin is now estimated at 15.4% to 15.9%, with adjusted margin growth between 110 basis points (bp) and 160 bp. The company had previously guided for adjusted operating margin between 14.5% and 14.9%, with adjusted margin growth between 20bps and 60bps.
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Shares of Watts Water have lost 5.3% in the past year compared to the Zacks subindustry’s 11.2% decline. WTS shares are down 26% from their 52-week high of $212 on November 11, 2021, making it relatively affordable for investors.
Strong fundamental drivers
Based in North Andover, MA, Watts Water designs, manufactures and sells a variety of flow control and water safety products for the water quality, water conservation, water safety markets water and water flow control.
Watts Water is focused on improving organic growth, expanding margin and reinvesting in productivity initiatives. Business performance is being earned by properly managing operations and sourcing amid supply chain issues.
An increased geographic footprint, aggressive cost-cutting actions and a strong balance sheet are the major headwinds. Focusing on differentiated product offerings provides a greater opportunity to increase your market position.
Weak macroeconomic conditions and supply chain disruptions affect its markets, customers and suppliers. Adverse currency conversion and geopolitical instability in Europe are other concerns.
Other actions to consider
Some top-rated stocks in the broader tech sector are worth considering Arista Networks (sides – free report), intuited (INTU – Free Report) i Badger Meter (BMI – Free report). Arista Networks and Badger Meter carry a Zacks Rank #1 (Strong Buy), while Intuit carries a Zacks Rank #2 (Buy). you can see the full list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for BMI’s 2022 earnings is set at $2.30 per share, up 7% over the last 60 days. Badger Meter earnings beat the Zacks Consensus Estimate in three of the previous four quarters, averaging 12.6%. IMC shares have lost 2.1% of their value in the past year.
The Zacks Consensus Estimate for Arista Networks’ 2022 earnings is set at $3.99 per share, up 8.4% over the past 60 days. The long-term profit growth rate is expected to be 18.6%.
ANET’s earnings beat the Zacks Consensus Estimate over the past four quarters by an average of 10.1%. ANET shares have risen 43.5% in the past year.
The Zacks Consensus Estimate for Intuit’s fiscal 2022 earnings is set at $11.72 per share, unchanged over the last 60 days. The long-term profit growth rate is expected to be 15.6%.
Intuit’s earnings beat the Zacks Consensus Estimate in three of the past four quarters, averaging 16.8%. INTU shares have lost 12.4% in the past year.