Jefferies cuts Watts Water stake as insiders sell shares

Jefferies Financial Group cut its stake in Watts Water Technologies by 16.1% in the third quarter, selling 3,587 shares and retaining 18,750 worth $6.641 million.

At quarter-end, the remaining 0.06% position appeared in Jefferies’ Form 13F (quarterly filing of institutional holdings) with the Securities and Exchange Commission (SEC).

Who added or reduced exposure?

Machina Capital S.A.S. initiated a $318,000 position, Lido Advisors LLC initiated $373,000 and AlphaCore Capital LLC initiated $237,000 during the third quarter.

Illinois Municipal Retirement Fund added 1,632 shares, lifting its holding 9.6% to 18,609 shares worth $6.591 million.

New York Life Investment Management LLC bought 1,193 more, up 34.3% to 4,671 shares worth $1.654 million.

Institutions and hedge funds owned 95.02% of the stock, though the quarter contained both new positions and reductions rather than a single institutional direction.

How much did insiders sell?

Director Joseph Noonan sold 3,650 shares on Tuesday, September 1 at an average $353.72, a transaction worth $1,291,078.

His SEC filing disclosed the trade and remains available through the commission’s website.

Elie Melhem sold 1,096 shares on Friday, September 4 at an average $359.55, totaling $394,066.80.

After the sale, he owned 7,867 shares worth approximately $2,828,579.85, representing a 12.23% decrease in his ownership; his SEC filing supplies additional information.

Corporate insiders owned 1.00% of the stock.

Did the quarter deliver?

On Wednesday, November 4, Watts Water reported quarterly earnings of $3.40 per share, beating the $3.14 consensus estimate by $0.26.

Revenue reached $728.00 million against $692.57 million expected, while prior-year earnings per share (EPS) were $2.50 and revenue rose 19.0% year over year.

Return on equity (ROE, profit relative to shareholders’ equity) reached 19.75%, and net margin (profit as a share of revenue) was 16.00%.

For the current fiscal year, sell-side analysts predict $13.11 in EPS, establishing the next earnings benchmark.

What did valuation and liquidity show?

• Trading range: Shares opened at $357.72 on Friday, against a one-year low of $262.96 and high of $394.54.
• Valuation: $11.94 billion market capitalization (equity market value); 26.82 price-to-earnings ratio (share price relative to earnings per share); 3.44 price-to-earnings-growth ratio (price-to-earnings adjusted for growth); and 1.13 beta (market-sensitivity measure).
• Liquidity and leverage: 2.80 current ratio (current assets against current liabilities); 1.71 quick ratio (current assets excluding inventory against current liabilities); and 0.04 debt-to-equity (debt relative to equity).
• Trading averages: $355.41 on the 50-day simple moving average (average share price over 50 trading days), versus $333.73 over 200 days.

What does the dividend schedule provide?

The company scheduled a $0.63 quarterly dividend for payment on Tuesday, December 15 to stockholders of record on Tuesday, December 1.

December 1 also serves as the ex-dividend date (the first date on which shares trade without the pending dividend).

The $2.52 annualized payment yields 0.7% (annual dividend relative to share price), while the payout ratio (dividend as a share of earnings) stands at 18.89%.

At an 18.89% payout ratio, the $0.63 quarterly dividend remains modest relative to earnings; the operating backdrop includes 19.0% revenue growth.

What did the analyst books say?

Robert W. Baird set a $405.00 price target on Friday, August 7.

Royal Bank of Canada cut its objective from $417.00 to $397.00 on Friday, November 6 and said: “sector perform.”

Wall Street Zen moved from “hold” to “buy” on Saturday, November 7.

KeyCorp raised its target from $380.00 to $400.00 and said: “overweight” on Thursday, August 6.

Weiss Ratings cut its rating from “buy (a)” to “buy (a-)” on Monday.

One analyst rates the stock Strong Buy, four rate it Buy and six rate it Hold.

MarketBeat.com lists a “Moderate Buy” consensus and a $368.30 consensus target price.

What does Watts Water make?

Watts Water Technologies designs and manufactures products that help control water safety, flow and quality in plumbing, heating and water-treatment systems.

Its portfolio serves residential, commercial and industrial applications, including backflow preventers, valves, water-pressure regulators, drainage products, water-quality and treatment systems, and controls for heating and hot-water applications.

It also provides solutions for water reuse and other water-management needs.

With revenue up 19.0% and insiders selling in September, the operating and ownership signals point in different directions, keeping the arithmetic from becoming a one-way story.