Dj Watts Water Price Target Announced At $300.00/Share By Jefferies

The end of the earnings season is always a good time to take a step back and see who shined (and who not so much). Let’s take a look at how water infrastructure stocks fared in Q3, starting with Tennant .

Trends towards conservation and reducing groundwater depletion are putting water infrastructure and treatment products front and center. Companies that can innovate and create solutions–especially automated or connected solutions–to address these thematic trends will create incremental demand and speed up replacement cycles. On the other hand, water infrastructure and treatment companies are at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.

The 5 water infrastructure stocks we track reported a very strong Q3. As a group, revenues beat analysts’ consensus estimates by 3.8%.

Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 6% since the latest earnings results.

Weakest Q3: Tennant

As the world’s largest manufacturer of autonomous mobile robots, Tennant designs, manufactures, and sells cleaning products to various sectors.

Tennant reported revenues of $303.3 million, down 4% year on year. This print fell short of analysts’ expectations by 0.9%. Overall, it was a slower quarter for the company with a significant miss of analysts’ EPS and revenue estimates.

"We are pleased to report third quarter results that demonstrate the resilience of our business model even as we navigate an increasingly complex and uncertain market environment," said Dave Huml, Tennant President and Chief Executive Officer.

Tennant scored the highest full-year guidance raise but had the weakest performance against analyst estimates of the whole group. Still, the market seems discontent with the results. The stock is down 1.4% since reporting and currently trades at $77.59.

Read our full report on Tennant here, it’s free for active Edge members.

Best Q3: Watts Water Technologies

Founded in 1874, Watts Water specializes in manufacturing water products and systems for residential, commercial, and industrial applications globally.

Watts Water Technologies reported revenues of $611.7 million, up 12.5% year on year, outperforming analysts’ expectations by 6.2%. The business had a stunning quarter with an impressive beat of analysts’ organic revenue estimates and a solid beat of analysts’ EBITDA estimates.

Watts Water Technologies delivered the fastest revenue growth among its peers. Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 1.4% since reporting. It currently trades at $278.21.

Is now the time to buy Watts Water Technologies? Access our full analysis of the earnings results here, it’s free for active Edge members.

Energy Recovery

Having saved far more than a trillion gallons of water, Energy Recovery provides energy recovery devices to the water treatment, oil and gas, and chemical processing sectors.

Energy Recovery reported revenues of $32 million, down 17.1% year on year, exceeding analysts’ expectations by 6.9%. It may have had the worst quarter among its peers, but its results were still good as it also locked in an impressive beat of analysts’ revenue estimates and a beat of analysts’ EPS estimates.

Energy Recovery delivered the biggest analyst estimates beat but had the slowest revenue growth in the group. As expected, the stock is down 17.1% since the results and currently trades at $14.30.

Read our full analysis of Energy Recovery’s results here.

Mueller Water Products

As one of the oldest companies in the water infrastructure industry, Mueller is a provider of water infrastructure products and flow control systems for various sectors.

Mueller Water Products reported revenues of $380.8 million, up 9.4% year on year. This number beat analysts’ expectations by 5.2%. It was a very strong quarter as it also recorded a solid beat of analysts’ organic revenue estimates and an impressive beat of analysts’ revenue estimates.

Mueller Water Products had the weakest full-year guidance update among its peers. The stock is down 3.1% since reporting and currently trades at $24.27.

Read our full, actionable report on Mueller Water Products here, it’s free for active Edge members.

Xylem

Formed through a spinoff, Xylem manufactures and services engineered products across a wide variety of applications primarily in the water sector.

Xylem reported revenues of $2.27 billion, up 7.8% year on year. This result surpassed analysts’ expectations by 1.9%. Overall, it was an exceptional quarter as it also logged an impressive beat of analysts’ EBITDA estimates and a solid beat of analysts’ adjusted operating income estimates.

The stock is down 5.8% since reporting and currently trades at $140.68.

Read our full, actionable report on Xylem here, it’s free for active Edge members.

Watts Water Technologies trades at $267.30 per share and has stayed right on track with the overall market, gaining 9% over the last six months. At the same time, the S&P 500 has returned 13.4%.

Is now a good time to buy WTS? Find out in our full research report, it’s free for active Edge members.

Why Are We Positive On Watts Water Technologies?

Founded in 1874, Watts Water specializes in manufacturing water products and systems for residential, commercial, and industrial applications globally.

1. Long-Term Revenue Growth Shows Strong Momentum

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Thankfully, Watts Water Technologies’s 9.3% annualized revenue growth over the last five years was solid. Its growth surpassed the average industrials company and shows its offerings resonate with customers.

2. Elite Gross Margin Powers Best-In-Class Business Model

At StockStory, we prefer high gross margin businesses because they indicate the company has pricing power or differentiated products, giving it a chance to generate higher operating profits.

Watts Water Technologies has best-in-class unit economics for an industrials company, enabling it to invest in areas such as research and development. Its margin also signals it sells differentiated products, not commodities. As you can see below, it averaged an elite 45.9% gross margin over the last five years. Said differently, roughly $45.86 was left to spend on selling, marketing, R&D, and general administrative overhead for every $100 in revenue.

3. Outstanding Long-Term EPS Growth

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Watts Water Technologies’s EPS grew at an astounding 21.8% compounded annual growth rate over the last five years, higher than its 9.3% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Final Judgment

These are just a few reasons Watts Water Technologies is a rock-solid business worth owning, but at $267.30 per share (or 24.6× forward P/E), is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free for active Edge members .