Join        Login             Stock Quote

Watts Water Technologies (WTS) Downgraded To 'Hold' By Brean Capital On Valuation

 January 07, 2013 01:56 PM

(By Balaseshan) Brean Capital LLC analysts Michael Gaugler and Christopher Noon downgraded rating of Watts Water Technologies Inc. (NYSE: WTS) to "Hold" from "Buy" based on valuation.

"The shares are trading beyond our fair value estimate of $42, and we are unwilling to lift our forward estimates or multiple assumptions at this time. We remain optimistic on the company's future prospects, but choose to move to a more neutral stance until valuation or end market conditions become more compelling," analysts Gaugler and Noon say in a statement.

Despite some significant headwinds, 2012 turned out to be a great year for Watts shareholders, with the shares gaining 25.7%. The company overcame some unfavorable commodity costs and product mix early in the year, a change in the CFO position, all while working through some unfavorable macroeconomic conditions in the United States and Europe, the analysts say.

[Related -Uninvestable Water]

It also faced some new regulations on lead-free manufacturing processes that resulted in some additional costs. Offsetting those headwinds were the successful integration of the Danfoss acquisition, continued cost rationalization and a share buyback, the brokerage noted. All-in, a solid performance in a difficult operating environment.

The analysts had looked carefully at their forward estimates for potential areas to increase forecasts. They noted that while their 2013 estimates are relatively in line with consensus expectations, their 2014 estimate of $2.80 is substantially below the $3.21 consensus estimate.

[Related -Gibraltar Industries, Inc.: A Small-Cap Stock That’s A (ROCK)]

As looking across the forecast model, the brokerage believes its certainly possible for Watts to have that type of year ($3.21 in 2014), if Europe recovers and North America can continue to show economic expansion and improving GDP growth.

From their perspective, the analysts are not willing to make that assumption (yet). With European GDP expected to be essentially zero and the North America GDP expected at 2%, expectations for a global recovery in demand in the industrial group look a bit early.

"We certainly expect Watts to benefit somewhat from continued expense controls and an improving housing market in the United States; however, those expectations are already factored into our previous (and still current) estimates," say Gaugler and Noon.

WTS is trading down 2.76% at $43.35 on Monday.

iOnTheMarket Premium


Post Comment -- Login is required to post message
Alert for new comments:
Your email:
Your Website:

rss feed

Latest Stories

article imageXerox Corp. (XRX): An Insider’s $500,000 Insider Buy

Last week was a healthy week of insider buying as 194 companies reported purchase records. The number read on...

article imageQihoo 360 Technology Co Ltd. (QIHU) Q2 Earnings Preview: A Green Monday

Qihoo 360 Technology Co Ltd. (NYSE:QIHU) will report its second quarter 2014 financial results on Monday, read on...

article imageSix Stocks that Could Outperform in the next 90 days

Earlier today, Goldman Sachs put out its list of the 50 stocks that Matter Most. It’s a list of the 50 read on...

article imageFoot Locker, Inc. (FL) Q2 Earnings Preview: Running Past the Street View

Foot Locker, Inc. (NYSE:FL) plans to report financial results for its second quarter ended August 2, 2014 read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.