Latest news with #BobPagano
Yahoo
17 hours ago
- Business
- Yahoo
The 5 Most Interesting Analyst Questions From Watts Water Technologies's Q1 Earnings Call
Watts Water's first quarter results were met with a positive market reaction, as the company outperformed Wall Street's revenue and profitability expectations despite a year-over-year sales decline. Management cited the benefit of its regionally focused manufacturing strategy and strong execution in the Americas, with CEO Bob Pagano noting, 'Our primary strategy has been to make products in the regions for the region.' While organic sales slipped due to fewer shipping days and ongoing weakness in Europe, Watts offset these headwinds with disciplined cost control and contributions from recent acquisitions, particularly in the U.S. segment. 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). Donald Trump's victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs. While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025). Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
Yahoo
12-06-2025
- Business
- Yahoo
WTS Q1 Earnings Call: Tariffs, Supply Chain Strategy, and Cautious Outlook Shape Results
Water management manufacturer Watts Water (NYSE:WTS) reported revenue ahead of Wall Street's expectations in Q1 CY2025, but sales fell by 2.3% year on year to $558 million. Its non-GAAP profit of $2.37 per share was 11.3% above analysts' consensus estimates. 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: $8.17 billion Watts Water's first quarter results were shaped by the impact of tariffs, ongoing supply chain adjustments, and weakness in European markets. CEO Bob Pagano attributed the 2% organic sales decline primarily to fewer shipping days and ongoing challenges in Europe, while highlighting incremental contributions from the I-CON acquisition. The company also benefited from productivity measures and cost controls that offset inflationary pressures. Pagano noted, 'We benefited from incremental sales from our I-CON acquisition. However, the benefit was more than offset by unfavorable foreign exchange.' The quarter also saw Watts Water continue automation and restructuring actions, including the exit from a French manufacturing facility, to drive further productivity. Looking ahead, Watts Water's guidance reflects caution around macroeconomic uncertainty, especially regarding tariffs and their impact on global demand. Management expects price increases, global sourcing actions, and accelerated onshoring of production to mitigate additional tariff costs and potential demand reduction later in the year. CEO Bob Pagano explained, 'Despite the uncertainty around the trade environment and resulting demand impacts, we are maintaining our full year organic sales and adjusted operating margin outlook.' The company anticipates ongoing softness in Europe due to continued heat pump destocking and construction market weakness, with some signs of recovery potentially emerging in the second half. Management is focused on leveraging its U.S. manufacturing base and maintaining flexibility in capital allocation to support growth opportunities. Management identified tariffs, supply chain adjustments, and regional demand trends as key drivers of the quarter's performance and outlook. Tariff management and pricing: Watts Water is proactively addressing tariff impacts through price increases, supply chain relocation, and increased U.S. manufacturing. Management emphasized its ongoing strategy of "making products in the regions for the region" to reduce exposure to tariffs, particularly those affecting components sourced from China. Productivity and cost controls: The company continues to implement automation, lean initiatives, and selective restructuring. The exit from a French facility and integration of recent acquisitions are expected to enhance productivity and reduce operational costs, supporting margins even as sales volumes face headwinds. Regional performance differences: Americas performance was described as solid, helped by U.S.-based manufacturing and pre-buying ahead of tariff-related price increases. Europe remained weak due to destocking in heat pumps and a slowdown in construction, while APMEA (Asia-Pacific, Middle East, and Africa) showed growth, partly offset by fewer shipping days in some markets. Acquisition integration: The integration of recent acquisitions, especially I-CON, is progressing ahead of schedule, with cost and revenue synergies already being realized. Management expects these businesses to contribute positively to adjusted EBITDA margins and earnings per share in 2025. Inventory and supply chain resilience: Watts Water maintains approximately three months of inventory and has secured sufficient raw material supplies, mitigating risks from supply chain disruptions and raw material shortages. Management noted ongoing efforts to diversify suppliers and maintain flexibility in the current trade environment. Watts Water's outlook for the remainder of the year is shaped by tariff impacts, regional demand softness, and its ability to offset cost pressures through operational measures. Tariff and trade environment: Management expects tariffs to remain a headwind, particularly for products with components sourced from China. The company is relying on price increases, supply chain shifts, and onshoring to offset these costs. CEO Bob Pagano cautioned that prolonged high tariffs could impact demand, especially in the second half of the year. European market challenges: The company forecasts continued weakness in Europe due to new construction slowdowns and ongoing heat pump destocking. While there are some indications that demand could stabilize later in the year, management remains cautious and has built conservative assumptions into its guidance. Capital allocation and productivity: Watts Water plans to maintain capital allocation flexibility, including a recently announced 21% dividend increase. Continued investment in automation, lean initiatives, and restructuring—such as the French facility exit—are central to its strategy for protecting margins and supporting long-term growth. In the coming quarters, the StockStory team will be monitoring (1) the effectiveness of Watts Water's tariff mitigation strategies and supply chain adjustments, (2) trends in European demand, particularly any recovery in the construction and heat pump markets, and (3) the continued integration and performance of acquisitions like I-CON. Progress on cost controls, price realization, and capital allocation decisions will also be notable signposts for sustained profitability. Watts Water Technologies currently trades at a forward P/E ratio of 26.4×. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it's free). Donald Trump's victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs. While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025). Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
