Watts Water Technologies, Inc. - Momentum

Watts Water Technologies, Inc. (WTS) just hit a fresh multi-year high at $37.79 after jumping higher with the market in December. With four consecutive earnings surprises and a bullish growth projection, this Zacks #1 rank stock has the right flow for momentum.

Our last update on Watts came in early November when the company reported another strong quarter that came in ahead of expectations.

Third-Quarter Results

Revenue for the period was up 4% from last year to $315 million. Earnings also looked good, coming in at 52 cents, 2% ahead of the Zacks Consensus Estimate, where the company has an average earnings surprise of 18% over the last four quarters.

The company noted that it saw steady gains from all of its major regions, with North America up 5% and its smaller China segment up 4%. European results were up a marginal 1% to $118 million.

With significant exposure to materials costs, particularly copper, Watts will face head winds in its margin profile if prices continue to trend higher.

Financial Profile

The company's continues to focus on its financial profile, with cash and equivalents up $59 million from last year to $292 million against total debt of $379 million.

Estimates Holding

But in spite of the good quarter, we haven't seen much movement in estimates, with the current year pegged at $2.00 and the next-year estimate calling for 13% growth.

Valuation

Not only does WTS have momentum, it also has value, trading with a forward P/E of 16X, a discount to the industry average of 17X.

12-Month Chart

On the chart, shares have been moving higher for most of the last 6 months, recently hitting a new multi-year high at $37.79. The stochastic below the chart is signaling that shares are trading well away from over-bought territory. Look for support from the trend line on any weakness, take a look below.

Read the Aug 23 WTS article here

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Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the new Zacks Momentum Trader Service.
 
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