Watts Water Technologies (WTS) AI Stock Analysis

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Watts Water Technologies

(NYSE:WTS)

Rating:79Outperform

Price Target:

$274.00

▲(12.00%Upside)

Watts Water Technologies demonstrates strong financial health and effective strategic management, bolstered by positive earnings results and proactive measures against tariff impacts. However, valuation concerns and potential market challenges in Europe temper the overall score.

Positive Factors

Market Share

Watts' domestic manufacturing footprint allowed them to gain market share and drive margins due to better product availability.

Smart & Connected

The company's push into Smart & Connected is viewed positively, with the data center exposure being a rapidly growing area to monitor.

Trade Policy

Watts could be a net beneficiary of U.S. trade policy with more domestic production than competitors who source more heavily from China.

Negative Factors

Construction Activity

The trajectory of interest rates makes it tough to confidently predict a major rebound in US construction activity, which is a significant part of the company's sales.

Industrial Economy

Uncertainty around global trading rules and trade freeze between the U.S. and China could lead to slowing orders and a recession in the industrial economy.

Trade Uncertainty

Uncertainty around global trading rules and trade freezes between the U.S. and China are expected to persist, posing challenges for investments.

Watts Water Technologies (WTS) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$8.17B

Dividend Yield0.74%

Average Volume (3M)198.69K

Price to Earnings (P/E)28.0

Beta (1Y)0.99

Revenue Growth3.89%

EPS Growth8.17%

CountryUS

Employees4,800

SectorIndustrials

Sector Strength92

IndustryIndustrial - Machinery

Share Statistics

EPS (TTM)2.37

Shares Outstanding27,422,200

10 Day Avg. Volume144,523

30 Day Avg. Volume198,687

Financial Highlights & Ratios

PEG Ratio6.47

Price to Book (P/B)4.63

Price to Sales (P/S)0.00

P/FCF Ratio24.23

Enterprise Value/Market Cap0.94

Enterprise Value/Revenue0.87

Enterprise Value/Gross Profit7.25

Enterprise Value/Ebitda4.40

Forecast

1Y Price Target

$220.00

Price Target Upside-10.08% Downside

Rating ConsensusHold

Number of Analyst Covering4

Watts Water Technologies Business Overview & Revenue Model

Company DescriptionWatts Water Technologies, Inc. is a global provider of plumbing, heating, and water quality solutions for residential, industrial, municipal, and commercial settings. Headquartered in North Andover, Massachusetts, the company designs, manufactures, and sells a comprehensive range of products and solutions that promote water safety, conservation, and efficiency. Its offerings include valves, drainage systems, filtration systems, water quality and conditioning products, as well as related accessories and instruments.

How the Company Makes MoneyWatts Water Technologies generates revenue primarily through the sale of its diverse range of plumbing, heating, and water quality products. The company's revenue streams are categorized by key segments, including Residential & Commercial Flow, HVAC & Gas, and Water Quality. Watts sells its products through a broad network of wholesale distributors, retail channels, and directly to contractors and engineers. Additionally, the company benefits from strategic partnerships and acquisitions that enhance its product portfolio and market reach. Watts also invests in innovation and technology to maintain a competitive edge, which supports continued growth and profitability.

Watts Water Technologies Earnings Call Summary

Earnings Call Date:May 07, 2025

(Q1-2025)

% Change Since: 15.88%|

Next Earnings Date:Jul 30, 2025

Earnings Call Sentiment Neutral

The earnings call presented a mixed sentiment, highlighting strong financial performance and proactive strategies to mitigate tariff impacts, but also noting challenges with declining organic sales and weakness in Europe. The company's outlook remains cautious due to ongoing economic uncertainties.

Q1-2025 Updates

Positive Updates

Record Adjusted Operating Income and Margin

The company reported record adjusted operating income and adjusted operating margin in the first quarter of 2025, exceeding expectations due to better-than-expected volume, productivity, and cost controls.

Dividend Increase

Watts Water Technologies announced a 21% dividend increase beginning in June 2025, supported by a strong balance sheet with ample capacity for capital allocation flexibility.

Strong Performance in Americas and APMEA

The Americas segment margin increased by 130 basis points to 23.4%, and APMEA sales increased 9% on a reported basis and 13% on an organic basis, with growth in China, the Middle East, and Australia.

Successful Integration of I-CON Acquisition

Integration efforts with the I-CON acquisition are progressing well, expected to be accretive to adjusted EBITDA margins and adjusted EPS in 2025.

Proactive Tariff Mitigation Strategies

The company is implementing strategies to offset tariff impacts, including price increases, supply chain relocation, and leveraging a dual-source supply base.

Negative Updates

Decline in Organic Sales

Organic sales declined 2% in the first quarter of 2025 due to fewer shipping days and continuing weakness in Europe.

Weakness in Europe

Europe organic sales were down 9% and reported sales were down 12%, impacted by fewer shipping days, heat pump destocking, and weakness in new construction markets.

Challenges Due to Tariffs

The company faces challenges from tariffs, particularly on raw materials and components sourced from China, impacting cost base and potentially demand in the second half of 2025.

Potential Demand Reduction in Second Half

There is expected demand reduction due to uncertainty in the trade environment, potential tariff impacts, and global economic slowdown.

Company Guidance

During the Watts Water Technologies First Quarter 2025 Earnings Call, the company reported better-than-expected first-quarter results, with record adjusted operating income, adjusted operating margin, and adjusted earnings per share. Organic sales declined by 2%, impacted by fewer shipping days and weakness in Europe, but this was offset by the I-CON acquisition. The adjusted operating margin reached 19%, exceeding expectations due to effective volume management, productivity, and cost controls. The company announced a 21% dividend increase beginning in June. For the full year, Watts maintained its organic sales and adjusted operating margin outlook, anticipating that price increases, global sourcing actions, and accelerated onshoring of production will offset tariff costs and potential demand reductions. Adjusted EBITDA grew by 1% to $119 million, with an adjusted EBITDA margin of 21.4%, and adjusted earnings per share increased by 2% to $2.37. The company's balance sheet remained strong, with a net debt to capitalization ratio of negative 9% and a net leverage of negative 0.3. For the second quarter, Watts projected organic sales growth of flat to up 3%, with EBITDA margins expected to be between 21.6% and 22.2%.

Watts Water Technologies Financial Statement Overview

Summary

Watts Water Technologies exhibits strong financial health across all verticals. The company shows robust revenue and profit growth, efficient cost management, and strong cash flow generation. The balance sheet is stable with low leverage, and overall, the company is well-positioned for future growth with minimal financial risks.

Income Statement

Very Positive

Watts Water Technologies shows strong performance with a steadily increasing revenue over the years. The Gross Profit Margin is robust at approximately 47.1% in the latest year, indicating efficient cost management. The Net Profit Margin has improved to about 12.9% in the latest year, reflecting growing profitability. The EBIT and EBITDA margins are consistent, demonstrating operational efficiency. There is a positive revenue growth trajectory, with revenue growth of 9.5% from 2023 to 2024.

Balance Sheet

Positive

The company maintains a solid financial position with a Debt-to-Equity Ratio of approximately 0.12, indicating low leverage and financial risk. The Return on Equity is healthy at 17.1%, showcasing effective utilization of equity capital to generate profits. The Equity Ratio stands at 71.3%, reflecting a strong equity base relative to total assets. Overall, the balance sheet stability is commendable, with a low risk of financial distress.

Cash Flow

Very Positive

Watts Water Technologies demonstrates strong cash flow generation capabilities. The Free Cash Flow has grown by 15.9% from 2023 to 2024, indicating good capital management. The Operating Cash Flow to Net Income Ratio is 1.24, showing efficient conversion of net income into cash flow. The Free Cash Flow to Net Income Ratio is 1.12, further reflecting efficient cash utilization. The company’s cash flow position supports continued investment and financial flexibility.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
2.25B	2.06B	1.98B	1.81B	1.51B
	Gross Profit
1.06B	960.90M	874.30M	767.10M	625.40M
	EBIT
390.40M	356.40M	315.00M	239.60M	181.10M
	EBITDA
455.10M	401.00M	354.30M	285.50M	226.80M
	Net Income Common Stockholders
291.20M	262.10M	251.50M	165.70M	114.30M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
386.90M	350.10M	310.80M	242.00M	218.90M
	Total Assets
2.40B	2.31B	1.93B	1.86B	1.74B
	Total Debt
197.00M	298.30M	147.60M	141.90M	198.20M
	Net Debt
-189.90M	-51.80M	-163.20M	-100.10M	-20.70M
	Total Liabilities
689.10M	796.10M	630.30M	682.40M	668.40M
	Stockholders Equity
1.71B	1.51B	1.30B	1.17B	1.07B
Cash Flow		Free Cash Flow
325.80M	281.10M	195.90M	154.10M	185.00M
	Operating Cash Flow
361.10M	310.80M	224.00M	180.80M	228.80M
	Investing Cash Flow
-124.70M	-343.10M	-22.90M	-30.70M	-54.80M
	Financing Cash Flow
-190.50M	69.00M	-121.70M	-118.60M	-181.90M

Watts Water Technologies Technical Analysis

Technical Analysis Sentiment

Positive

Last Price244.65

Price Trends

50DMA

217.85

Positive

100DMA

214.18

Positive

200DMA

208.45

Positive

Market Momentum

MACD

6.32

Positive

RSI

64.31

Neutral

STOCH

61.04

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For WTS, the sentiment is Positive. The current price of 244.65 is above the 20-day moving average (MA) of 241.18, above the 50-day MA of 217.85, and above the 200-day MA of 208.45, indicating a bullish trend. The MACD of 6.32 indicates Positive momentum. The RSI at 64.31 is Neutral, neither overbought nor oversold. The STOCH value of 61.04 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for WTS.

Watts Water Technologies Risk Analysis

Watts Water Technologies disclosed 23 risk factors in its most recent earnings report. Watts Water Technologies reported the most risks in the “Legal & Regulatory” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 2 New Risks

Any actual or perceived failure to comply with new or existing laws, regulations and other requirements relating to the privacy, security and processing of personal information could adversely affect our business, results of operations, or financial condition. Q4, 2024

We are subject to environmental, health and safety laws and regulations, which could result in costs, liabilities and impacts to our business operations. Q4, 2024

Watts Water Technologies Peers Comparison

Overall Rating

UnderperformOutperform

Sector (66)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
SPXC	80 Outperform	$7.30B	36.46	15.24%	―	10.78%	30.05%
WTS	79 Outperform	$8.17B	28.01	17.61%	0.74%	3.89%	8.17%
THR	75 Outperform	$919.54M	17.69	11.03%	―	0.48%	-5.52%
FLS	72 Outperform	$6.39B	22.92	14.00%	1.72%	4.23%	20.40%
AOS	70 Outperform	$9.14B	17.99	27.97%	2.08%	-1.60%	-7.12%
MWA	69 Neutral	$3.82B	26.63	17.68%	1.07%	10.96%	43.44%
Sector *	66 Neutral	$4.50B	12.28	5.32%	248.52%	4.13%	-12.36%

* Industrials Sector Average

Performance Comparison

WTS

Watts Water Technologies

244.65

59.71

32.29%

FLS

Flowserve

48.87

1.78

3.78%

MWA

Mueller Water Products

24.63

7.15

40.90%

AOS

A. O. Smith Corporation

64.34

-15.66

-19.57%

SPXC

SPX

157.70

25.31

19.12%

THR

Thermon Group Holdings

27.79

-2.83

-9.24%

Watts Water Technologies Corporate Events

Executive/Board ChangesShareholder Meetings

Watts Water Technologies Elects New Board of Directors

Positive

May 22, 2025

On May 21, 2025, Watts Water Technologies, Inc. held its annual meeting where key decisions were made regarding the company’s leadership and financial oversight. The meeting resulted in the election of nine directors for the upcoming term, approval of executive compensation, and ratification of KPMG LLP as the independent registered public accounting firm for the fiscal year ending December 31, 2025. These decisions reflect strong shareholder support, with significant majorities voting in favor of each proposal, indicating confidence in the company’s strategic direction and governance.

The most recent analyst rating on (WTS) stock is a Hold with a $217.00 price target. To see the full list of analyst forecasts on Watts Water Technologies stock, see the WTS Stock Forecast page.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.