Watts Water's Q4 Earnings and Revenues Outpace Estimates

Core Insights - Watts Water Technologies, Inc. (WTS) reported fourth-quarter 2024 adjusted earnings per share (EPS) of $2.05, an increase from $1.97 in the prior-year quarter, exceeding the Zacks Consensus Estimate by 7.3% [1] - The company's quarterly net sales decreased by 1.3% year over year to $540.4 million, slightly surpassing the Zacks Consensus Estimate by 0.6% [2] Sales Performance - Acquisitions in the Americas contributed $23 million in sales, accounting for 4% of overall growth, while organic sales fell by 5% year over year [3] - Net sales in the Americas rose 3% year over year to $398 million, but organic sales dipped 3% due to fewer shipping days [4] - Europe experienced a significant decline, with net sales plunging 15% year over year to $109 million, attributed to lower volumes and a decrease in the OEM channel [5] - APMEA saw a 4% increase in net sales to $34 million, with strong demand in China and the Middle East driving growth [6] Financial Metrics - Gross profit decreased by 1.2% year over year to $252.7 million, while selling, general and administrative expenses fell by 5.9% to $162.9 million [7] - Operating income increased by 12.9% year over year to $89 million, with an operating margin expansion of 210 basis points to 16.5% [7] - For the full year 2024, cash from operating activities was $361.1 million, up from $310.8 million in the prior year, and free cash flow increased to $331.7 million from $281.1 million [8] Share Repurchase and Liquidity - In the fourth quarter, the company repurchased approximately 20,000 shares for $4 million, totaling about 85,000 shares for $17 million in the full year 2024 [9] - As of December 31, 2024, the company had $386.9 million in cash and cash equivalents, with long-term debt of $197 million [10] Guidance - For 2025, the company anticipates adjusted operating margins between 17.7% and 18.3%, with reported and organic sales expected to range from a decline of 3% to an increase of 2% [11] - For the first quarter of 2025, projected adjusted operating margins are between 16.9% and 17.5%, with reported and organic sales expected to decline by 7-3% [12] Market Position - Watts Water currently holds a Zacks Rank 3 (Hold), with shares having increased by 17.1% in the past six months, contrasting with no change in the Zacks Instruments - Control industry [13]