Shares of Watts Water Technologies Inc. dropped Thursday after the industrial valve maker issued guidance for its first quarter below Wall Street's expectations and several analysts cut their outlook.
The stock shed $3.42, or 11.2 percent, to close at $27.16 Thursday.
North Andover, Mass.-based Watts Water cited the slumping housing market, as well as slow commercial growth and lower profits in China, when issuing the guidance.
The company now expects first-quarter profit of 35 to 38 cents per share, compared with a profit of 51 cents per share in the year-ago quarter. Analysts polled by Thomson Financial expect a profit of 54 cents per share for the quarter.
Brean, Murray, Carret & Co. analyst Michael Gaugler slashed his price target to $35 from $41 and said the guidance indicates margin erosion has become "pronounced."
The new target implies he expects shares to rise about 15 percent over Wednesday's $30.58 close.
"We recommend investors with an interest in the name accumulate opportunistically, and have the requisite patience we believe will be necessary to achieve our target price over the next 12 to 18 months," Gaugler said in a note to clients.
Partly because of Watts Water's own guidance change, Gaugler cut his 2008 earnings estimate to $1.67 per share from $2.39 per share, below analysts' $2.31-per-share expectation. He kept a "Buy" rating.
Oppenheimer & Co. analyst Christopher Glynn said Watts Water continues to be up against a "very difficult" environment and cut his 2008 earnings estimate to $1.81 per share from $2.17 per share.
Glynn rates shares "Underperform."
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