Watts Water Technologies' (WTS) Q3 Earnings: Revenue In Line With Expectations

Watts Water Technologies, Inc. (NYSE: WTS) recently reported its third-quarter 2024 earnings, with revenue in line with market expectations. The company's sales of $544 million increased 8% year-over-year, driven by strategic acquisitions and organic sales growth in certain regions. Despite a decline in organic sales growth, WTS's performance demonstrates resilience in the face of economic challenges.

WTS's revenue growth in Q3 was primarily driven by acquisitions, which contributed $59 million, or 12%, to reported growth. Organic sales growth within APMEA was more than offset by declines in the Americas and Europe. Foreign exchange movements had an immaterial impact on sales growth. The company's strategic focus on acquisitions and regional expansion, coupled with its ability to manage organic sales growth, drove its Q3 revenue performance.


However, WTS's adjusted operating margin decreased 90 basis points (bps) to 17.1% in Q3, primarily due to the dilutive impact of acquisitions, volume deleverage, inflation, and incremental investments. Favorable price realization and productivity benefits were offset by these negative factors. The company's adjusted earnings per share (EPS) of $2.03 remained relatively flat compared to the prior year.


Despite the decline in adjusted operating margin, WTS raised the midpoint of its full-year 2024 operating margin outlook. The company's strong performance through the third quarter and its fourth-quarter expectations led to this increase. WTS's cash flow and balance sheet remain strong, providing flexibility for capital allocation decisions.

In conclusion, Watts Water Technologies' Q3 earnings results demonstrate a solid revenue performance, with sales in line with market expectations. Although the adjusted operating margin decreased, the company's strategic focus on acquisitions and regional expansion, coupled with its strong cash flow and balance sheet, position WTS for long-term growth and shareholder value creation. As the company continues to navigate near-term challenges, investors should monitor its progress and consider its potential as a value investment.