Watts Water Technologies (WTS) Q4 2024 earnings summary

Executive summary

• Achieved record 2024 sales, operating income, adjusted EPS, and free cash flow, with Q4 results ahead of expectations despite a 1% organic sales decline due to European weakness.

• Fourth quarter 2024 sales were $540M, down 1% reported and 5% organically, with operating margin up to 16.5%-16.8% and adjusted EPS up 4% to $2.05.

• Integration of recent acquisitions (I-CON Systems, Bradley, Josam) is progressing, exceeding profit and synergy targets, and expanding digital and institutional offerings.

• Strategic focus on productivity, automation, and lean initiatives drove significant savings and supported margin expansion.

• Launched Nexa, a new intelligent water management solution, with positive early customer feedback and scaling underway.

Financial highlights

• FY 2024 sales: $2.25B, up 10% reported, down 1% organically; Q4 sales: $540M, down 1% reported and 5% organic.

• Adjusted EBITDA: $454M, up 11%; margin 20.1%, up 20 bps.

• Adjusted operating income: $400M, up 9%; margin 17.7%, down 10 bps.

• Adjusted EPS: $8.86, up 7% year-over-year; Q4 adjusted EPS: $2.05, up 4%.

• Free cash flow: $332M, up 18%, with 114% conversion rate; operating cash flow: $361M.

Outlook and guidance

• 2025 sales expected between -3% and +2% (reported and organic); Americas: -3% to +3%, Europe: -8% to -2%, APMEA: flat to +5%.

• Adjusted EBITDA margin guidance: 20.4%-21%; adjusted operating margin: 17.7%-18.3%.

• Q1 2025 sales expected to decline 3%-7% due to fewer shipping days and European weakness; Q1 adjusted operating margin: 16.9%-17.5%.

• Free cash flow conversion expected to be at least 100% of net income in 2025.