What Happened?
Shares of water management manufacturer Watts Water (NYSE: WTS) fell 5.3% in the morning session after the company reported underwhelming earnings. The water management products manufacturer posted revenue of $611.7 million, up 12.5% from the prior year, and adjusted earnings of $2.50 per share, both surpassing analyst expectations. However, the strong results were likely overshadowed by a soft outlook. Analyst forecasts point to a significant slowdown, with expected revenue and earnings growth of just 2.5% and 3%, respectively, over the next 12 months. This underwhelming projection suggests potential demand headwinds, likely prompting a "sell-the-news" reaction from investors who are more focused on future growth prospects than past performance.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Watts Water Technologies? Access our full analysis report here.
What Is The Market Telling Us
Watts Water Technologies’s shares are not very volatile and have only had 5 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 9 months ago when the stock gained 10.2% on the news that the company reported strong fourth-quarter results that exceeded analysts' EPS expectations, with organic revenue slightly surpassing Wall Street's estimates. Margin expansion contributed to the earnings beat as improved pricing and productivity offset volume declines, inflation, and acquisition-related costs. The improved margins likely reassured investors, easing concerns over weak top-line growth. Notably, sales dropped 1% y/y on a reported basis and 5% organically, largely due to fewer shipping days. Looking ahead, sales guidance for 2025 was mixed, with projected revenue growth ranging from -3% to +2%, and adjusted operating margin is expected to be mostly flat. Overall, this quarter had some key positives.
Watts Water Technologies is up 36.2% since the beginning of the year, and at $273.09 per share, it is trading close to its 52-week high of $285.86 from September 2025. Investors who bought $1,000 worth of Watts Water Technologies’s shares 5 years ago would now be looking at an investment worth $2,463.
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