Spotting Winners: Watts Water Technologies (NYSE:WTS) And Water Infrastructure Stocks In Q3
Earnings results often indicate what direction a company will take in the months ahead. With Q3 behind us, let’s have a look at Watts Water Technologies (NYSE:WTS) and its peers.
Trends towards conservation and reducing groundwater depletion are putting water infrastructure and treatment products front and center. Companies that can innovate and create solutions–especially automated or connected solutions–to address these thematic trends will create incremental demand and speed up replacement cycles. On the other hand, water infrastructure and treatment companies are at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.
The 5 water infrastructure stocks we track reported a strong Q3. As a group, revenues beat analysts’ consensus estimates by 1.2%.
In light of this news, share prices of the companies have held steady as they are up 1.7% on average since the latest earnings results.
Watts Water Technologies (NYSE:WTS)
Founded in 1874, Watts Water (NYSE:WTS) specializes in manufacturing water products and systems for residential, commercial, and industrial applications globally.
Watts Water Technologies reported revenues of $543.6 million, up 7.8% year on year. This print was in line with analysts’ expectations, and overall, it was a satisfactory quarter for the company with a decent beat of analysts’ adjusted operating income estimates.
Chief Executive Officer and President Robert J. Pagano Jr. commented, “We are pleased with our third quarter results that exceeded our expectations. I want to express my gratitude to the entire Watts team for their dedication to providing exceptional customer service. Given our strong performance through the third quarter and our fourth quarter expectations, we are increasing the midpoint of our full-year 2024 operating margin outlook.”
Watts Water Technologies Total Revenue
Interestingly, the stock is up 10.8% since reporting and currently trades at $218.90.
Having saved far more than a trillion gallons of water, Energy Recovery (NASDAQ:ERII) provides energy recovery devices to the water treatment, oil and gas, and chemical processing sectors.
Energy Recovery reported revenues of $38.58 million, up 4.2% year on year, outperforming analysts’ expectations by 3.2%. The business had an incredible quarter with an impressive beat of analysts’ EPS estimates and a solid beat of analysts’ EBITDA estimates.
Energy Recovery Total Revenue
Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 13.7% since reporting. It currently trades at $15.42.
Formed through a spinoff, Xylem (NYSE:XYL) manufactures and services engineered products across a wide variety of applications primarily in the water sector.
Xylem reported revenues of $2.10 billion, up 1.3% year on year, falling short of analysts’ expectations by 3.2%. It was a slower quarter as it posted a significant miss of analysts’ organic revenue estimates.
Xylem delivered the weakest performance against analyst estimates, slowest revenue growth, and weakest full-year guidance update in the group. As expected, the stock is down 1% since the results and currently trades at $128.94.
As one of the oldest companies in the water infrastructure industry, Mueller (NYSE:MWA) is a provider of water infrastructure products and flow control systems for various sectors.
Mueller Water Products reported revenues of $348.2 million, up 15.5% year on year. This result beat analysts’ expectations by 6.5%. It was a very strong quarter as it also produced a solid beat of analysts’ organic revenue and EBITDA estimates.
Mueller Water Products achieved the biggest analyst estimates beat and fastest revenue growth among its peers. The stock is up 7.8% since reporting and currently trades at $25.85.
As the world’s largest manufacturer of autonomous mobile robots, Tennant (NYSE:TNC) designs, manufactures, and sells cleaning products to various sectors.
Tennant reported revenues of $315.8 million, up 3.6% year on year. This print missed analysts’ expectations by 1.1%. Overall, it was a slower quarter as it also produced a miss of analysts’ EPS and EBITDA estimates.
Tennant delivered the highest full-year guidance raise among its peers. The stock is up 4.4% since reporting and currently trades at $91.20.
In response to the Fed's rate hikes in 2022 and 2023, inflation has been gradually trending down from its post-pandemic peak, trending closer to the Fed's 2% target. Despite higher borrowing costs, the economy has avoided flashing recessionary signals. This is the much-desired soft landing that many investors hoped for. The recent rate cuts (0.5% in September and 0.25% in November 2024) have bolstered the stock market, making 2024 a strong year for equities. Donald Trump’s presidential win in November sparked additional market gains, sending indices to record highs in the days following his victory. However, debates continue over possible tariffs and corporate tax adjustments, raising questions about economic stability in 2025.
Want to invest in winners with rock-solid fundamentals? Check out our Hidden Gem Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.
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