The 5 Most Interesting Analyst Questions From Watts Water Technologies's Q1 Earnings Call
Is now the time to buy WTS? Find out in our full research report (it's free).
Revenue: $558 million vs analyst estimates of $547.8 million (2.3% year-on-year decline, 1.9% beat)
Adjusted EPS: $2.37 vs analyst estimates of $2.13 (11.3% beat)
Adjusted EBITDA: $119.8 million vs analyst estimates of $110.1 million (21.5% margin, 8.8% beat)
Operating Margin: 15.7%, down from 16.9% in the same quarter last year
Organic Revenue fell 2.1% year on year (6.4% in the same quarter last year)
Market Capitalization: $8.52 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Nathan Jones (Stifel) asked about gaining market share due to Watts' U.S.-centered manufacturing advantage. CEO Bob Pagano explained that while the company benefits from its regional focus, it aims to 'get our fair share' and will monitor how tariffs affect competitive dynamics throughout the year.
Mike Halloran (RW Baird) questioned whether management's cautious second-half outlook reflects real-time softness or just prudence. Pagano confirmed it is primarily caution due to macroeconomic uncertainty, rather than observed demand deterioration so far.
Jeff Hammond (KeyBanc) inquired about prebuying behavior ahead of price increases and how Watts is controlling this effect. Pagano acknowledged some customer prebuying, estimated at $5 million in the first quarter, and described measures to limit excessive orders based on historical purchasing patterns.
Ryan Connors (Northcoast Research) explored the extent to which raw material shortages (like bismuth) are driving price increases versus tariffs. Management replied that tariffs are the main factor; raw material constraints are being managed with adequate inventory levels.
Andrew Krill (Deutsche Bank) asked about capacity to expand U.S. manufacturing and the need for incremental investment. Pagano said current facilities can add shifts without significant capex, as most are not running at full utilization.
In the coming quarters, the StockStory team will monitor (1) Watts' ability to maintain margin resilience as tariffs and pricing actions flow through, (2) signs of demand normalization or further weakness in Europe, particularly in construction and heat pump channels, and (3) progress on integration and synergy capture from recent acquisitions like I-CON. Updates on any trade policy changes and their impact on supply chain strategy will also be closely watched.
Watts Water Technologies currently trades at $255.29, up from $211.59 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it's free).
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