Watts Water Technologies (NYSE:WTS) Q3 2020 Earnings Prep

in EARNINGS/INVESTING IDEAS by

Watts Water Technologies, Inc. (NYSE:WTS) is scheduled to report Q3 earnings results after markets close for trading on November 4, 2020.

The company is expected to report earnings of $0.88/share on revenue of $363.2 million. The consensus earnings per share (EPS) of $0.88/share is based on a poll of 7 analysts and represents a decline in eps of −15.7% over the same quarter last year, when the company reported earnings of $1.04/share.

The revenue forecast of $363.2 million based on a poll of 7 analysts implies a year-over-year (YoY) decline in revenue of −8.0%. Last year the company reported $394.7 million in revenue for the quarter.

Expected to report EPS contraction of −15.7% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $363.19 $394.70 −8.0%
EPS $0.88 $1.04 −15.7%

Earnings Call Trends

Historically, management has exceeded analyst expectations 7 out of the last 8 tracked quarters, and met expectations 1 quarter.

What are your expectations from Watts Water Technologies, Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.39 $0.74 89.1% Beat
Q1, 2020 $0.86 $0.95 10.5% Beat
Q4, 2019 $0.98 $1 1.5% Beat
Q3, 2019 $1.03 $1.04 0.7% Beat
Q2, 2019 $1.09 $1.09 0% Met
Q1, 2019 $0.92 $0.94 2.3% Beat
Q4, 2018 $0.87 $0.88 1.0% Beat
Q3, 2018 $0.95 $0.99 3.9% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 28, 2020, the stock price reacted by increasing 3.5%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 3, 2020 $83.89 $86.79 3.5% Increase
May 6, 2020 $81.58 $78.18 −4.2% Decline
February 10, 2020 $100.23 $107.47 7.2% Increase
October 30, 2019 $95.38 $93.25 −2.2% Decline

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.82, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.82 implies a 0.2% chance of earnings manipulation.

Fundamentals And Technical Analysis

Watts Water Technologies, Inc. is currently trading at $110.12/share, down −1.6% for the day. The company is trading at approximately 96.1% of its 52-week high of $114.45/share. The company’s stock price is up 26.9% since the last earnings report and down −1.3% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 68.04 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:WTS Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 31.89 and a forward P/E multiple of 32.27.

Watts Water Technologies, Inc.’s current share price also implies a price-to-book (P/B) multiple of 3.76. The following table summarizes some other key fundamental ratios:

Data as of October 28, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 28, 2020
Stock Price (Current) $110.12
P/E Ratio 31.9x
P/E Ratio (Fwd) 32.3x
PEG Ratio −3.0
Total Debt / Total Capital 6.6%
Levered Free Cash Flow $182.9 million
EV / EBITDA 16.6x

Finbox

Watts Water Technologies, Inc. is a mid-cap stock with a market capitalization of $3.768 billion and a total enterprise value of $3.883 billion. The company operates in the Industrials sector and the Machinery industry.

Watts Water Technologies, Inc. designs, manufactures, and sells products and systems that manage and conserve the flow of fluids and energy into, through and out of buildings in the residential and commercial markets in the Americas, Europe, the Asia-Pacific, the Middle East, and Africa. The company offers residential and commercial flow control products, including backflow preventers, water pressure regulators, temperature and pressure relief valves, and thermostatic mixing valves. It also provides heating, ventilation, and air conditioning and gas products, such as boilers, water heaters, and heating solution; hydronic and electric heating systems for under-floor radiant applications; custom heat and hot water solutions; hydronic pump groups for boiler manufacturers and alternative energy control packages; and flexible stainless steel connectors for natural and liquid propane gas in commercial food service and residential applications. In addition, the company offers drainage and water re-use products comprising drainage products and engineered rain water harvesting solutions for commercial, industrial, marine, and residential applications; and water quality products that include point-of-use and point-of-entry water filtration, conditioning, and scale prevention systems for commercial and residential applications. Further, it provides smart mixing system under the IntelliStation name; thermostat with home automation voice recognition capabilities under the Invita name; and platinum boiler under the AERCO Benchmark name. The company sells its products to plumbing, heating, and mechanical wholesale distributors and dealers, as well as original equipment manufacturers, specialty product distributors, do-it-yourself chains, and retail chains; and directly to wholesalers and private label accounts. Watts Water Technologies, Inc. was founded in 1874 and is headquartered in North Andover, Massachusetts.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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