Watts Water Technologies, Inc. (NYSE:WTS) last week reported its latest yearly results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. It was a credible result overall, with revenues of US$2.1b and statutory earnings per share of US$7.82 both in line with analyst estimates, showing that Watts Water Technologies is executing in line with expectations. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Following the latest results, Watts Water Technologies' nine analysts are now forecasting revenues of US$2.26b in 2024. This would be a solid 10.0% improvement in revenue compared to the last 12 months. Per-share earnings are expected to increase 6.5% to US$8.38. In the lead-up to this report, the analysts had been modelling revenues of US$2.25b and earnings per share (EPS) of US$8.35 in 2024. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
It will come as no surprise then, to learn that the consensus price target is largely unchanged at US$205. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Watts Water Technologies analyst has a price target of US$217 per share, while the most pessimistic values it at US$175. This is a very narrow spread of estimates, implying either that Watts Water Technologies is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. The analysts are definitely expecting Watts Water Technologies' growth to accelerate, with the forecast 10.0% annualised growth to the end of 2024 ranking favourably alongside historical growth of 6.7% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 3.2% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Watts Water Technologies to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. The consensus price target held steady at US$205, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on Watts Water Technologies. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Watts Water Technologies going out to 2026, and you can see them free on our platform here..
However, before you get too enthused, we've discovered 1 warning sign for Watts Water Technologies that you should be aware of.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.