What Happened?
Shares of water management manufacturer Watts Water (NYSE:WTS) jumped 3.5% in the afternoon session after Keybanc upgraded its rating on the stock to 'Overweight' from 'Sector Weight' and announced a $340 price target.
The upgrade from analyst Jeffrey Hammond followed a review of the company's prospects into 2026. KeyBanc noted that the outlook was "too compelling to ignore," even if the company's main markets did not improve. The firm's positive view was based on expected pricing tailwinds, growth from its Data Center business, and recent merger and acquisition activity. KeyBanc also mentioned that it felt the company's emerging acquisition strategy was underappreciated by the market. The new price target represented a potential 17.5% upside from the stock's previous closing price.
After the initial pop the shares cooled down to $298.26, up 3.1% from previous close.
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What Is The Market Telling Us
Watts Water Technologies’s shares are not very volatile and have only had 6 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 11 months ago when the stock gained 10.2% on the news that the company reported strong fourth-quarter results that exceeded analysts' EPS expectations, with organic revenue slightly surpassing Wall Street's estimates. Margin expansion contributed to the earnings beat as improved pricing and productivity offset volume declines, inflation, and acquisition-related costs. The improved margins likely reassured investors, easing concerns over weak top-line growth. Notably, sales dropped 1% y/y on a reported basis and 5% organically, largely due to fewer shipping days. Looking ahead, sales guidance for 2025 was mixed, with projected revenue growth ranging from -3% to +2%, and adjusted operating margin is expected to be mostly flat. Overall, this quarter had some key positives.
Watts Water Technologies is up 7.1% since the beginning of the year, and at $298.26 per share, has set a new 52-week high. Investors who bought $1,000 worth of Watts Water Technologies’s shares 5 years ago would now be looking at an investment worth $2,332.
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