Watts Water Technologies, Inc. WTS reported first-quarter 2025 adjusted earnings per share (EPS) of $2.37 compared with $2.33 in the prior-year quarter. The bottom line topped the Zacks Consensus Estimate by 11.8%.
The company’s quarterly net sales declined 2% year over year to $558 million. The top line surpassed the Zacks Consensus Estimate by 3.2%. Organic sales were down 2% year over year.
Incremental acquisition sales in the Americas added $5 million, contributing 1% to the reported growth. However, organic sales declined, primarily due to fewer shipping days across all regions, resulting in an estimated 3% fall. Ongoing market weakness and inventory destocking in Europe further hurt performance. Unfavorable foreign exchange rates also reduced sales by $6 million, or 1%.
In response to the better-than-anticipated results, shares inched up 2% in the pre-market trading session today. Shares of the company have gained 0.2% in the past year against the Zacks Instruments - Control industry’s decline of 12.8%. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
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Segment Results
Americas: Net sales were flat on a reported basis at $418 million, while organic sales dipped 1%. The decline was primarily due to fewer shipping days, which resulted in an approximate 3% fall, more than offsetting the impact of price realization. The I-CON acquisition contributed $5 million in incremental sales, adding 1% to reported growth. Adjusted operating margin expanded 130 basis points (bps) to 23.4%, supported by favorable price realization, productivity gains and cost actions, which more than offset the effects of inflation and lower volume leverage.
Europe: Net sales plunged 12% year over year to $108 million on a reported basis and 9% on an organic basis. Sales declined primarily due to lower volumes because of fewer shipping days and ongoing destocking in the heat pump and wholesale channels. Additionally, unfavorable foreign exchange movements reduced reported sales by 3%. Adjusted operating margin declined 180 bps to 13.9%, as the negative impacts of volume deleverage and inflation outweighed the gains from price realization and productivity improvements.
APMEA: Net sales increased 9% to $32 million and 13% organically. Key growth drivers included strong demand across China, Australia and the Middle East, partially offset by a decline in New Zealand due to fewer shipping days. Unfavorable foreign exchange rates reduced sales by 4%. Adjusted operating margin contracted 70 bps to 17.5%, as the positive impacts of higher sales and productivity were more than offset by inflation and an unfavorable sales mix.
WTS’ Other Details
Gross profit increased 1.9% year over year to $272.5 million. Selling, general and administrative expenses declined 1.2% to $167.5 million. Operating income was $87.7 million, down 9.3% year over year.
Operating margin contracted 120 bps to 15.7%. The adjusted operating margin was 19%, up 80 bps year over year.
Cash Flow & Liquidity
For the first quarter ended March 31, 2025, Watts Water generated $55.2 million of cash from operating activities compared with $45.6 million in the prior-year period.
For the quarter, free cash flow was $45.6 million compared with $36.6 million a year ago. The increase in operating and free cash flow was primarily driven by reduced income tax payments. Continued sequential improvements are anticipated throughout 2025, aligned with typical seasonal trends.
During the quarter, the company repurchased approximately 19,000 shares for $3.9 million. As of quarter-end, roughly $141 million remained available under the stock repurchase program approved in 2023, which has no expiration date.
As of March 31, 2025, the company had $336.8 million in cash and cash equivalents with $197.2 million of long-term debt compared with the respective figures of $386.9 million and $$197 million as of Dec. 31, 2024.
Watts Water Technologies, Inc. Price, Consensus and EPS Surprise
Watts Water Technologies, Inc. price-consensus-eps-surprise-chart | Watts Water Technologies, Inc. Quote
WTS’ Guidance
For 2025, the company updated its guidance for reported sales. It expects reported sales to range from a decline of 2% to an increase of 3% from the earlier guidance of a decrease of 3% to a rise of 2%. It still expects organic sales to range from a decline of 3% to an increase of 2%
Watts Water still expects an adjusted EBITDA margin to be 20.4% to 21.0%, indicating an improvement of 30 bps to 90 bps. It still anticipates the adjusted operating margin to be between 17.7% and 18.3%, implying 0-60 bps improvement year over year.
For the second quarter of 2025, the company projects the adjusted operating margin to be between 19.1% and 19.7%, implying growth of 30-90 bps year over year. Reported sales are expected to record an increase of 1-4%, and organic sales are expected to remain flat to increase 3%.
WTS’ Zacks Rank
Watts Water currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Recent Performance of Other Companies in the Broader Space
Badger Meter, Inc. BMI reported earnings of $1.30 for the first quarter of 2025, which beat the Zacks Consensus Estimate by 20.4%. Also, the bottom line compared favorably with the year-ago quarter’s EPS of 99 cents. Quarterly net sales of BMI were $222.2 million, up 13% from $196.3 million in the year-ago quarter, driven by higher utility water sales and the initial contribution from the SmartCover acquisition. The Zacks Consensus Estimate was pegged at $222 million.
In the past six months, shares of BMI have inched up 14.3%.
Infosys INFY ended fiscal 2025 on a mixed note, with its fourth-quarter earnings surpassing the Zacks Consensus Estimate while revenues fell short of the same. For the quarter, the company reported earnings of 20 cents per share, beating the consensus mark by a penny. However, Infosys’ bottom line registered a year-over-year decline of 15.3%.
In the past year, shares of INFY have gained 3.7%.
Microsoft MSFT reported third-quarter fiscal 2025 earnings of $3.46 per share, which beat the Zacks Consensus Estimate by 8.13% and increased 17.7% on a year-over-year basis. Revenues of $70.06 billion jumped 13.3% year over year and beat the Zacks Consensus Estimate by 2.46%.
In the past six months, shares of MSFT have inched up 3.7%.
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