Mueller Water Products (MWA) appears an attractive pick, as it has been recently upgraded to a Zacks Rank #2 (Buy). An upward trend in earnings estimates -- one of the most powerful forces impacting stock prices -- has triggered this rating change.The sole determinant of the Zacks rating is a company's changing earnings picture. The Zacks Consensus Estimate -- the consensus of EPS estimates from the sell-side analysts covering the stock -- for the current and following years is tracked by the system.Since a ...

Core Insights - Mueller Water Products, Inc. has appointed Darin Harvey as Senior Vice President of Operations and Supply Chain effective September 8, 2025, reporting to President and COO Paul McAndrew [1][3] Company Overview - Mueller Water Products is a leading manufacturer and marketer of products and solutions for the transmission, distribution, and measurement of water in North America, with a broad portfolio including engineered valves, fire hydrants, metering products, and software for critical water system data [5] Leadership Background - Darin Harvey brings over 25 years of experience, previously serving as Executive Vice President of Supply Chain at Advanced Drainage Systems, where he managed global distribution and led operational improvements [2][3] - Prior to his role at ADS, Mr. Harvey held positions at Forum Energy Technologies, Honeywell, Foster Wheeler, and Danaher Corporation, focusing on lean manufacturing and global supply chain management [3] Strategic Focus - The company aims to enhance operational standards, customer service, supply chain processes, and manufacturing capabilities to drive productivity and future growth [3] - Mr. Harvey expressed enthusiasm for joining Mueller, emphasizing his commitment to developing high-performing teams and creating value for stakeholders [4]

Group 1 - The analyst has over 15 years of experience in investing and has provided research services to mid-sized hedge funds with assets under management between $100 million and $500 million [1] - The focus is on medium-term investing in ideas with catalysts to unlock value or short selling in case of downside catalysts [1] - The analyst has a generalist approach but has higher conviction in the industrial, consumer, and technology sectors due to extensive professional experience [1]

Core Viewpoint - MUELLER WATER PRODUCTS (MWA) is showing potential as a stock pick due to a recent "golden cross" event, indicating a bullish trend may be forthcoming [1][2]. Technical Analysis - A "golden cross" occurs when a stock's short-term moving average (50-day) crosses above its long-term moving average (200-day), suggesting a bullish breakout [2]. - The formation of a golden cross typically follows three stages: a downtrend that bottoms out, the crossover of moving averages, and continued upward momentum [3]. Recent Performance - MWA has experienced a 7% rally over the past four weeks, indicating positive momentum [4]. - The stock currently holds a 3 (Hold) rating on the Zacks Rank, suggesting it may be positioned for a breakout [4]. Earnings Outlook - MWA's earnings outlook for the current quarter is positive, with two upward revisions in estimates over the past 60 days, compared to no downward revisions [4]. - The Zacks Consensus Estimate for MWA has also increased, reinforcing the bullish sentiment [4][6].

PART I. FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and related disclosures for Mueller Water Products, Inc [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements of Mueller Water Products, Inc. and its subsidiaries for the periods ended June 30, 2025, and September 30, 2024 (balance sheet), and June 30, 2025, and 2024 (statements of operations, comprehensive income, stockholders' equity, and cash flows) It includes detailed notes explaining the company's organization, accounting policies, revenue recognition, income taxes, borrowing arrangements, retirement plans, stock-based compensation, supplemental balance sheet information, segment performance, accumulated other comprehensive loss, commitments, contingencies, and subsequent events [Unaudited Condensed Consolidated Balance Sheets](index=3&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position as of June 30, 2025, and September 30, 2024 | Metric | June 30, 2025 (in millions) | September 30, 2024 (in millions) | | :-------------------------------- | :----------------------------- | :--------------------------------- | | **Assets:** | | | | Cash and cash equivalents | $372.0 | $309.9 | | Receivables, net | $205.4 | $208.9 | | Inventories, net | $316.6 | $301.7 | | **Total current assets** | **$937.8** | **$858.4** | | Property, plant and equipment, net | $327.8 | $318.8 | | **Total assets** | **$1,730.4** | **$1,635.9** | | **Liabilities and Stockholders' Equity:** | | | | **Total current liabilities** | **$242.8** | **$258.0** | | Long-term debt | $449.8 | $448.7 | | **Total liabilities** | **$801.4** | **$825.8** | | **Total stockholders' equity** | **$929.0** | **$810.1** | | **Total liabilities and stockholders' equity** | **$1,730.4** | **$1,635.9** | [Unaudited Condensed Consolidated Statements of Operations](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) This section details the company's financial performance for the three and nine months ended June 30, 2025 and 2024 | Metric | Three months ended June 30, 2025 (in millions) | Three months ended June 30, 2024 (in millions) | Nine months ended June 30, 2025 (in millions) | Nine months ended June 30, 2024 (in millions) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net sales | $380.3 | $356.7 | $1,048.9 | $966.5 | | Gross profit | $145.7 | $131.4 | $376.7 | $348.1 | | Operating income | $73.7 | $67.0 | $191.0 | $153.3 | | Income before income taxes | $72.0 | $63.2 | $185.5 | $139.0 | | Net income | $52.5 | $47.3 | $139.1 | $105.9 | | Net income per basic share | $0.34 | $0.30 | $0.89 | $0.68 | | Net income per diluted share | $0.33 | $0.30 | $0.88 | $0.68 | | Dividends declared per share | $0.067 | $0.064 | $0.201 | $0.192 | [Unaudited Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section presents the company's comprehensive income for the three and nine months ended June 30, 2025 and 2024 | Metric | Three months ended June 30, 2025 (in millions) | Three months ended June 30, 2024 (in millions) | Nine months ended June 30, 2025 (in millions) | Nine months ended June 30, 2024 (in millions) | | :------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net income | $52.5 | $47.3 | $139.1 | $105.9 | | Total other comprehensive income (loss), net of income tax | $20.6 | $(3.8) | $18.9 | $6.3 | | Comprehensive income | $73.1 | $43.5 | $158.0 | $112.2 | [Unaudited Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) This section outlines changes in stockholders' equity for the nine months ended June 30, 2025 and 2024 | Metric | September 30, 2024 (in millions) | June 30, 2025 (in millions) | | :-------------------------------- | :----------------------------- | :-------------------------- | | Total Stockholders' Equity | $810.1 | $929.0 | | Net income (9 months) | $105.9 (2024) | $139.1 (2025) | | Dividends declared (9 months) | $(29.9) (2024) | $(31.4) (2025) | | Stock repurchased (9 months) | $(10.0) (2024) | $(15.0) (2025) | [Unaudited Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section details the company's cash inflows and outflows for the nine months ended June 30, 2025 and 2024 | Metric | Nine months ended June 30, 2025 (in millions) | Nine months ended June 30, 2024 (in millions) | | :-------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net cash provided by operating activities | $135.8 | $149.5 | | Net cash used in investing activities | $(32.7) | $(27.9) | | Net cash used in financing activities | $(47.2) | $(40.7) | | Net change in cash and cash equivalents | $62.1 | $83.0 | | Cash and cash equivalents at end of period | $372.0 | $243.3 | [Notes to the Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements [Note 1. Organization and Basis of Presentation](index=10&type=section&id=Note%201.%20Organization%20and%20Basis%20of%20Presentation) This note describes the company's business segments, seasonal operations, and significant accounting policies - **Mueller Water Products** operates in two segments: **Water Flow Solutions** (iron gate valves, specialty valves, service brass products) and **Water Management Solutions** (fire hydrants, repair/installation, natural gas, metering, leak detection, pressure management)[24](index=24&type=chunk) - The business is seasonal, with **net sales** and **operating income** historically **lowest** in the December 31 and March 31 quarters due to cold weather restricting construction in the northern U.S. and Canada[26](index=26&type=chunk) - The company recorded **$5.1 million** in **Strategic reorganization and other charges** for the nine months ended June 30, 2025, **down from $12.7 million** in the prior year, related to leadership transition, asset impairment, and transaction expenses[32](index=32&type=chunk) - The company is involved in a **New Markets Tax Credit (NMTC) program** for its brass foundry, consolidating related variable interest entities (VIEs) and expecting to recognize an **estimated gain of $3.9 million** in December 2027[33](index=33&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk) [Note 2. Revenue from Contracts with Customers](index=12&type=section&id=Note%202.%20Revenue%20from%20Contracts%20with%20Customers) This note details the company's revenue recognition policies and related contract balances | Metric | June 30, 2025 (in millions) | September 30, 2024 (in millions) | | :-------------------------- | :----------------------------- | :--------------------------------- | | Receivables, net | $205.4 | $208.9 | | Deferred revenue | $11.3 | $12.8 | | Metric | Nine months ended June 30, 2025 (in millions) | Nine months ended June 30, 2024 (in millions) | | :------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | | Beginning balance (Allowance for Credit Losses) | $8.3 | $7.3 | | Provision (reversed) charged to expense | $(0.2) | $2.3 | | Write-offs and other | $(2.8) | $(1.7) | | Ending balance (Allowance for Credit Losses) | $5.3 | $7.9 | | Metric | Nine months ended June 30, 2025 (in millions) | Nine months ended June 30, 2024 (in millions) | | :------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | | Beginning balance (Deferred Revenue) | $12.8 | $9.2 | | Revenue deferred during the period | $6.2 | $6.9 | | Previously deferred revenue recognized | $(7.7) | $(5.0) | | Ending balance (Deferred Revenue) | $11.3 | $11.1 | - Revenue for product sales is recognized upon shipment when control transfers to the customer Performance obligations for software hosting and leak detection monitoring services are satisfied over time[45](index=45&type=chunk)[47](index=47&type=chunk) [Note 3. Income Taxes](index=14&type=section&id=Note%203.%20Income%20Taxes) This note provides information on the company's effective income tax rates and unrecognized tax benefits | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Nine months ended June 30, 2025 | Nine months ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | U.S. federal statutory income tax rate | 21.0 % | 21.0 % | 21.0 % | 21.0 % | | Effective income tax rate | 27.1 % | 25.2 % | 25.0 % | 23.8 % | - Gross liabilities for **unrecognized income tax benefits increased to $3.6 million** at June 30, 2025, from **$3.0 million** at September 30, 2024[52](index=52&type=chunk) - The company is assessing the impact of the newly enacted H.R. 1 (One Big Beautiful Bill Act) but does not expect a **material impact** on its financial statements or estimated annual **effective tax rate** for 2025[54](index=54&type=chunk) [Note 4. Borrowing Arrangements](index=15&type=section&id=Note%204.%20Borrowing%20Arrangements) This note outlines the company's debt structure, credit facilities, and related fair values | Debt Component | June 30, 2025 (in millions) | September 30, 2024 (in millions) | | :----------------------- | :----------------------------- | :--------------------------------- | | 4.0% Senior Notes | $450.0 | $450.0 | | Finance leases | $3.5 | $2.7 | | Total debt | $453.5 | $452.7 | | Long-term debt (net) | $449.8 | $448.7 | - The **ABL agreement** provides a revolving credit facility of up to **$175.0 million**, maturing in March 2029, with an **excess availability of $163.0 million** at June 30, 2025[55](index=55&type=chunk)[61](index=61&type=chunk) - The **4.0% Senior Unsecured Notes**, totaling **$450.0 million**, mature on June 15, 2029, and had a **fair value of $432.7 million** at June 30, 2025[62](index=62&type=chunk)[63](index=63&type=chunk) [Note 5. Retirement Plan](index=16&type=section&id=Note%205.%20Retirement%20Plan) This note details the company's net periodic pension costs for the reported periods | Metric | Three months ended June 30, 2025 (in millions) | Three months ended June 30, 2024 (in millions) | Nine months ended June 30, 2025 (in millions) | Nine months ended June 30, 2024 (in millions) | | :------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Service cost | $0.2 | $0.2 | $0.5 | $0.5 | | Pension expense (benefit) other than service | $— | $1.0 | $(0.1) | $3.0 | | Net periodic cost | $0.2 | $1.2 | $0.4 | $3.5 | [Note 6. Stock-based Compensation Plans](index=17&type=section&id=Note%206.%20Stock-based%20Compensation%20Plans) This note describes the company's stock-based compensation programs and related expenses | Grant Type | Total grant date fair value (in millions) - 9 months ended June 30, 2025 | | :-------------------------------- | :----------------------------------------------------------------------- | | MRSUs | $2.7 | | PRSUs | $1.8 | | Restricted stock units | $4.4 | | Phantom Plan instruments | $3.4 | | Non-qualified stock options | $1.8 | | Employee stock purchase plan instruments | $0.3 | | **Total** | **$14.4** | - **Operating income** included **stock-based compensation expense of $3.2 million** for the three months ended June 30, 2025 (**down from $3.7 million** in 2024) and **$10.8 million** for the nine months ended June 30, 2025 (**up from $10.1 million** in 2024)[78](index=78&type=chunk) - As of June 30, 2025, there was approximately **$13.0 million of unrecognized compensation expense** related to **stock-based compensation**, to be expensed through March 2028[78](index=78&type=chunk) [Note 7. Supplemental Balance Sheet Information](index=20&type=section&id=Note%207.%20Supplemental%20Balance%20Sheet%20Information) This note provides additional details on specific asset and liability categories from the balance sheet | Asset Category | June 30, 2025 (in millions) | September 30, 2024 (in millions) | | :-------------------------------- | :----------------------------- | :--------------------------------- | | Inventories, net | $316.6 | $301.7 | | Property, plant and equipment, net | $327.8 | $318.8 | | Goodwill, net | $87.6 | $80.7 | | Total other current assets | $43.8 | $37.9 | | Total other noncurrent assets | $69.1 | $68.3 | | Liability Category | June 30, 2025 (in millions) | September 30, 2024 (in millions) | | :-------------------------------- | :----------------------------- | :--------------------------------- | | Total other current liabilities | $123.2 | $147.3 | | Total other noncurrent liabilities | $58.9 | $63.7 | - **Goodwill**, entirely within the **Water Management Solutions** segment, **increased to $87.6 million** at June 30, 2025, from **$80.7 million** at September 30, 2024, primarily due to changes in foreign currency exchange rates[82](index=82&type=chunk)[83](index=83&type=chunk) [Note 8. Segment Information](index=22&type=section&id=Note%208.%20Segment%20Information) This note presents financial performance data for the company's Water Flow Solutions and Water Management Solutions segments | Metric | Water Flow Solutions (3 months) | Water Management Solutions (3 months) | Water Flow Solutions (9 months) | Water Management Solutions (9 months) | | :-------------------------------- | :------------------------------ | :------------------------------------ | :------------------------------ | :------------------------------------ | | Net revenue (2025) | $216.6 million | $163.7 million | $607.4 million | $441.5 million | | Net revenue (2024) | $208.1 million | $148.6 million | $555.2 million | $411.3 million | | Operating income (2025) | $60.5 million | $30.1 million | $149.9 million | $88.7 million | | Operating income (2024) | $57.8 million | $25.5 million | $137.6 million | $69.6 million | | Capital expenditures (2025) | $5.3 million | $6.4 million | $15.8 million | $17.0 million | | Capital expenditures (2024) | $6.2 million | $6.0 million | $16.1 million | $11.9 million | - **Water Flow Solutions' net revenue increased 4.1%** for the three months and **9.4%** for the nine months ended June 30, 2025, driven by increased volumes and higher pricing[84](index=84&type=chunk) - **Water Management Solutions' net revenue increased 10.2%** for the three months and **7.3%** for the nine months ended June 30, 2025, also due to increased volumes and higher pricing[84](index=84&type=chunk) [Note 9. Accumulated Other Comprehensive Loss](index=23&type=section&id=Note%209.%20Accumulated%20Other%20Comprehensive%20Loss) This note details the components and changes in accumulated other comprehensive loss | Component | September 30, 2024 (in millions) | June 30, 2025 (in millions) | | :-------------------------------- | :----------------------------- | :-------------------------- | | Pension actuarial amortization, net of income tax | $(19.7) | $(18.5) | | Foreign currency translation, net of income tax | $(11.1) | $6.6 | | Total Accumulated Other Comprehensive Loss | $(30.8) | $(11.9) | - **Total accumulated other comprehensive loss decreased from $(30.8) million** at September 30, 2024, to **$(11.9) million** at June 30, 2025, primarily due to **$17.7 million in foreign currency translation income**[85](index=85&type=chunk) [Note 10. Commitments and Contingencies](index=23&type=section&id=Note%2010.%20Commitments%20and%20Contingencies) This note outlines the company's legal proceedings, environmental matters, and other contingent liabilities - The company is involved in various **legal proceedings**, including environmental matters where Tyco International plc has an **indemnification obligation**, and a **Superfund site** in North Birmingham, Alabama, for which no amount has been accrued due to estimation uncertainty[86](index=86&type=chunk)[88](index=88&type=chunk)[89](index=89&type=chunk) - A **CBP matter** regarding underpaid duties for certain products resulted in an **assessment of approximately $9.0 million**, which the company had originally expensed **$9.1 million** for in 2024[90](index=90&type=chunk)[91](index=91&type=chunk) - A **cybersecurity incident** led to a **putative class action lawsuit**, which the company **settled for an aggregate cap of $285,000** for class members, plus legal fees and a service award, subject to court approval[92](index=92&type=chunk) [Note 11. Subsequent Events](index=24&type=section&id=Note%2011.%20Subsequent%20Events) This note discloses significant events occurring after the balance sheet date - On July 30, 2025, the Board of Directors declared a **quarterly dividend of $0.067 per share**, payable on or about August 21, 2025[98](index=98&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of the company's business, a detailed analysis of its financial performance for the three and nine months ended June 30, 2025, compared to the prior year, and a discussion of its financial condition, liquidity, and capital resources It highlights key factors impacting results, such as sales growth, gross margin changes, operating expenses, and strategic initiatives, while also addressing external challenges like geopolitical events, cybersecurity incidents, and inflationary pressures [Overview](index=25&type=section&id=Overview) This section provides an overview of the company's business, market segments, and key operational challenges - **Mueller Water Products** operates in two segments: **Water Flow Solutions** (**57% of FY2024 net sales**) and **Water Management Solutions** (**43% of FY2024 net sales**)[102](index=102&type=chunk) - Approximately **60-65% of 2024 net sales** were from municipal water infrastructure repair/replacement, **25-30%** from residential construction, and **10%** from natural gas utilities/industrial applications[103](index=103&type=chunk) - The Israel-Hamas war caused supply chain disruptions and labor challenges at the Ariel, Israel facility, leading to investments in recruiting, supplier expansion, and shifting manufacturing[104](index=104&type=chunk) - **Cybersecurity incidents** in fiscal 2024 caused temporary operational disruptions and incurred **$1.5 million in expenses**, but had **no material impact** on full fiscal 2024 consolidated **net sales**[105](index=105&type=chunk)[106](index=106&type=chunk) - For fiscal year 2025, consolidated **net sales** are anticipated to **increase between 6.9% and 7.6%** compared to fiscal 2024, driven by resilient demand in municipal repair and replacement, despite economic uncertainties[108](index=108&type=chunk) - **Inventory costs increased by approximately 1.5%** in the first nine months of 2025 due to inflation, with further increases expected from new tariffs enacted after March 2025[110](index=110&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance for the reported periods, highlighting key drivers and changes [Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024](index=27&type=section&id=Three%20Months%20Ended%20June%2030%2C%202025%20Compared%20to%20Three%20Months%20Ended%20June%2030%2C%202024) This section compares the company's consolidated and segment financial results for the three months ended June 30 Consolidated Financial Performance (Three Months Ended June 30) | Metric | 2025 (in millions) | 2024 (in millions) | Change ($) | Change (%) | | :-------------------------------- | :----------------- | :----------------- | :--------- | :--------- | | Net sales | $380.3 | $356.7 | $23.6 | 6.6% | | Gross profit | $145.7 | $131.4 | $14.3 | 10.9% | | Gross margin | 38.3% | 36.8% | 1.5 pts | | | Selling, general and administrative | $71.0 | $61.5 | $9.5 | 15.4% | | Operating income | $73.7 | $67.0 | $6.7 | 10.0% | | Net interest expense | $1.7 | $2.8 | $(1.1) | (39.3)% | | Net income | $52.5 | $47.3 | $5.2 | 11.0% | - **Gross profit** was negatively impacted by approximately **7%** due to inflation and increased tariffs[114](index=114&type=chunk) - **SG&A expenses increased by $9.5 million**, primarily due to a **$9.1 million unfavorable foreign currency fluctuation** (U.S. dollar depreciation vs. Israeli shekel), inflation, and higher personnel/third-party fees[115](index=115&type=chunk) Segment Net Sales (Three Months Ended June 30) | Segment | 2025 (in millions) | 2024 (in millions) | Change ($) | Change (%) | | :-------------------------- | :----------------- | :----------------- | :--------- | :--------- | | Water Flow Solutions | $216.6 | $208.1 | $8.5 | 4.1% | | Water Management Solutions | $163.7 | $148.6 | $15.1 | 10.2% | - **Water Flow Solutions' gross margin decreased to 38.7%** (**from 39.4%**), while **Water Management Solutions' gross margin increased to 37.8%** (**from 33.3%**)[120](index=120&type=chunk)[123](index=123&type=chunk) - **Water Management Solutions' SG&A increased significantly by $9.0 million** (**39.8%**), mainly due to a **$7.1 million unfavorable foreign currency impact**[124](index=124&type=chunk) [Nine months ended June 30, 2025 Compared to Nine months ended June 30, 2024](index=30&type=section&id=Nine%20months%20ended%20June%2030%2C%202025%20Compared%20to%20Nine%20months%20ended%20June%2030%2C%202024) This section compares the company's consolidated and segment financial results for the nine months ended June 30 Consolidated Financial Performance (Nine Months Ended June 30) | Metric | 2025 (in millions) | 2024 (in millions) | Change ($) | Change (%) | | :-------------------------------- | :----------------- | :----------------- | :--------- | :--------- | | Net sales | $1,048.9 | $966.5 | $82.4 | 8.5% | | Gross profit | $376.7 | $348.1 | $28.6 | 8.2% | | Gross margin | 35.9% | 36.0% | (0.1) pts | | | Selling, general and administrative | $180.6 | $182.1 | $(1.5) | (0.8)% | | Operating income | $191.0 | $153.3 | $37.7 | 24.6% | | Net interest expense | $5.6 | $9.7 | $(4.1) | (42.3)% | | Net income | $139.1 | $105.9 | $33.2 | 31.3% | - **Gross profit** was negatively impacted by approximately **5%** due to inflation and increased tariffs, and by a **$4.1 million write-down of inventory and assets** at the legacy brass foundry[128](index=128&type=chunk)[134](index=134&type=chunk) - **SG&A decreased by $1.5 million**, primarily due to lower intangible amortization, partially offset by **unfavorable foreign currency fluctuation** and higher personnel/third-party fees[129](index=129&type=chunk) Segment Net Sales (Nine Months Ended June 30) | Segment | 2025 (in millions) | 2024 (in millions) | Change ($) | Change (%) | | :-------------------------- | :----------------- | :----------------- | :--------- | :--------- | | Water Flow Solutions | $607.4 | $555.2 | $52.2 | 9.4% | | Water Management Solutions | $441.5 | $411.3 | $30.2 | 7.3% | - **Water Flow Solutions' gross margin decreased to 35.5%** (**from 37.0%**), while **Water Management Solutions' gross margin increased to 36.4%** (**from 34.6%**)[134](index=134&type=chunk)[137](index=137&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, borrowing capacity, and capital allocation strategies Cash and Borrowing Capacity (June 30, 2025) | Metric | Amount (in millions) | | :-------------------------------- | :------------------- | | Cash and cash equivalents | $372.0 | | Additional borrowing capacity under ABL | $163.0 | - The company **repurchased $15.0 million of common stock** during the nine months ended June 30, 2025, with **$65.0 million remaining under the share repurchase authorization**[142](index=142&type=chunk) - **Cash flows provided by operating activities decreased by $13.7 million to $135.8 million** for the nine months ended June 30, 2025, primarily due to changes in working capital and other assets/liabilities, despite increased **net income**[144](index=144&type=chunk) - **Capital expenditures increased to $32.8 million** for the nine months ended June 30, 2025, from **$28.0 million** in the prior year, driven by foundry investments and **cybersecurity infrastructure improvements**[145](index=145&type=chunk) - Expected **capital expenditures** for fiscal year 2025 are between **$50.0 million and $52.0 million**[145](index=145&type=chunk) - The company expects existing **cash**, equivalents, and **borrowing capacity**, combined with **operating cash flows**, to be **sufficient** for anticipated operating needs, tax payments, **capital expenditures**, and debt service for the next twelve months[146](index=146&type=chunk) Credit Ratings (June 30, 2025) | Rating Agency | Corporate Credit Rating | 4.0% Senior Notes Rating | Outlook | | :-------------- | :---------------------- | :----------------------- | :------ | | Moody's | Ba1 | Ba1 | Stable | | Standard & Poor's | BB | BB | Positive | [Material Cash Requirements](index=35&type=section&id=Material%20Cash%20Requirements) This section outlines the company's significant future cash obligations, including debt and lease payments - The company has **debt obligations of $450.0 million 4.0% Senior Notes** maturing in 2029, with **annual cash interest payments of $18.0 million** through 2029[158](index=158&type=chunk) - **Cumulative cash obligations** include **$33.1 million for operating leases** through 2034 and **$4.0 million for finance leases** through 2030[158](index=158&type=chunk) - **Purchase obligations** for raw materials and parts are approximately **$128.7 million** for the next 12 months and **$1.4 million** beyond June 30, 2026[158](index=158&type=chunk) [Off-Balance Sheet Arrangements](index=35&type=section&id=Off-Balance%20Sheet%20Arrangements) This section details the company's off-balance sheet commitments and guarantees - The company does not have relationships with unconsolidated entities or financial partnerships for **off-balance sheet arrangements**[159](index=159&type=chunk) - As of June 30, 2025, the company had **$11.8 million in letters of credit** and **$13.4 million in surety bonds** outstanding[160](index=160&type=chunk) [Seasonality](index=35&type=section&id=Seasonality) This section explains the seasonal impact on the company's net sales and operating income - The company's business is seasonal, with **net sales** and **operating income** typically **lowest** in the December 31 and March 31 quarters due to cold weather impacting construction[161](index=161&type=chunk) [Critical Accounting Estimates](index=35&type=section&id=Critical%20Accounting%20Estimates) This section confirms no changes to the company's critical accounting estimates since the prior fiscal year-end - There have been **no changes** in the company's determination of **critical accounting estimates** since September 30, 2024[162](index=162&type=chunk) [Item 4. Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms that there have been no material changes to the company's internal control over financial reporting during the quarter ended June 30, 2025 The Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of the end of the reporting period, while acknowledging the inherent limitations of any control system - **No material changes** occurred in **internal control over financial reporting** during the quarter ended June 30, 2025[163](index=163&type=chunk) - The CEO and CFO concluded that **disclosure controls and procedures** were **effective** as of June 30, 2025[165](index=165&type=chunk)[166](index=166&type=chunk) - Management acknowledges that control systems provide reasonable, not absolute, assurance and have **inherent limitations**[167](index=167&type=chunk) PART II. OTHER INFORMATION This section provides additional disclosures on legal matters, risk factors, equity sales, and corporate governance [Item 1. Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 10 of the financial statements for details on legal proceedings, which include environmental matters, a CBP duty underpayment issue, and a cybersecurity incident class action lawsuit - **Legal proceedings information** is detailed in Note 10 to the Condensed Consolidated Financial Statements[170](index=170&type=chunk) [Item 1A. Risk Factors](index=37&type=page&id=Item%201A.%20Risk%20Factors) This section directs readers to the company's 2024 Annual Report on Form 10-K for a comprehensive discussion of risk factors that could materially affect its business, financial condition, or operating results, noting that additional unknown or immaterial risks may also exist - Readers should refer to the 'RISK FACTORS' section in the 2024 Annual Report on Form 10-K for a **comprehensive discussion** of factors that could materially affect the business[171](index=171&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's share repurchase activities during the third quarter of fiscal 2025, indicating that 405,592 shares were repurchased under its authorized program, with $65.0 million remaining under the authorization Share Repurchase Activity (Third Quarter Fiscal 2025) | Period | Total shares purchased | Average price paid per share | Shares purchased under announced plans | Maximum dollar value remaining (in millions) | | :---------------- | :--------------------- | :--------------------------- | :------------------------------------- | :------------------------------------------- | | April 1-30, 2025 | — | $— | — | $75.0 | | May 1-31, 2025 | 405,592 | $24.64 | 405,592 | $65.0 | | June 1-30, 2025 | — | $— | — | $65.0 | | **Total** | **405,592** | **$24.64** | **405,592** | | - The company has a **stock repurchase program** authorized for up to **$250.0 million**, **increased** in 2017 from **$50.0 million**[174](index=174&type=chunk) [Item 5. Other Information](index=37&type=section&id=Item%205.%20Other%20Information) This section states that no officers or directors adopted, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025 - **No officers or directors** adopted, modified, or terminated **Rule 10b5-1** or **non-Rule 10b5-1 trading arrangements** during the three months ended June 30, 2025[173](index=173&type=chunk) [Item 6. Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the quarterly report, including certifications from the CEO and CFO (Sections 302 and 906 of Sarbanes-Oxley Act), and XBRL formatted financial information - Exhibits include **certifications from the CEO and CFO** (31.1, 31.2, 32.1, 32.2) and **XBRL formatted financial information** (101, 104)[175](index=175&type=chunk)

Financial Data and Key Metrics Changes - Consolidated net sales increased by 6.6% to $380.3 million, setting a new quarterly record [18][6] - Gross margin exceeded 38%, reflecting a sequential improvement of 320 basis points [7][19] - Adjusted EBITDA reached a record $86.4 million, an increase of 1.4% year over year [22] - Adjusted net income per diluted share increased by 6.3% year over year to $0.334, setting a new third-quarter record [23] Business Line Data and Key Metrics Changes - Water Supply Solutions (WSS) net sales increased by 4.1% to $216.6 million, driven by volume growth in iron gate and specialty valves [23] - Water Management Solutions (WMS) net sales increased by 10.2% to $163.7 million, led by strong volume growth of repair products and hydrants [26] - Adjusted operating income for WSS increased by 4.7% to $60.5 million, while WMS adjusted operating income increased by 12.6% to $30.3 million [24][26] Market Data and Key Metrics Changes - The residential construction market is experiencing a slowdown, particularly in single-family housing starts, influenced by high interest rates and macroeconomic uncertainty [38] - The municipal repair and replacement market remains strong, driven by the need to repair aging infrastructure [40] Company Strategy and Development Direction - The company aims to enhance manufacturing efficiencies and operational excellence while navigating external challenges such as tariffs [17][12] - The closure of the legacy brass foundry is expected to yield benefits in the fourth quarter and into the next year [13][19] - The company is focused on sustainability and innovation, as highlighted in their annual ESG report [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving record results for the second consecutive year, despite external uncertainties [9][17] - The anticipated impact of tariffs has been lower than initially expected, with updated estimates for annualized tariff impact decreasing to approximately 3% to 4% of cost of sales [14] - The company is prepared to implement additional pricing actions to offset higher input costs as needed [16] Other Important Information - Free cash flow for the first nine months of the year was $103 million, representing 71% of adjusted net income [28] - The company ended the quarter with $451 million in total debt and $372 million in cash and cash equivalents, maintaining a strong balance sheet [29] Q&A Session Summary Question: Insights on end markets and stability - Management noted a slowdown in the residential construction market, particularly in single-family housing starts, while the municipal market remains strong [38][40] Question: Margin outlook and FX impact - Management indicated that the FX headwind was a one-time event and discussed expectations for margins moving forward [41][42] Question: Legacy brass foundry impact on margins - The legacy brass foundry closure is expected to improve margins, with management anticipating an 8-10 basis point improvement [47] Question: Infrastructure funding and market conditions - Management highlighted that infrastructure funding has been slow, with no immediate benefits expected from the infrastructure bill [74][75] Question: Pricing actions and demand pull forward - Management confirmed no significant pre-buy demand was observed, and pricing adjustments were made in response to tariffs [66][72]

Financial Data and Key Metrics Changes - Consolidated net sales increased by 6.6% to $380.3 million, setting a new quarterly record [17] - Gross margin improved to 38.3%, reflecting a 150 basis point increase year over year [18] - Adjusted EBITDA reached a record $86.4 million, up 1.4% compared to the prior year [21] - Free cash flow for the quarter was $56 million after $12 million in capital expenditures [9] - Adjusted net income per diluted share increased by 6.3% year over year to $0.34 [22] Business Line Data and Key Metrics Changes - Water Supply Solutions (WSS) net sales increased by 4.1% to $216.6 million, driven by volume growth in iron gate and specialty valves [22] - Water Management Solutions (WMS) net sales rose by 10.2% to $163.7 million, led by strong volume growth in repair products and hydrants [24] - Adjusted operating income for WSS increased by 4.7% to $60.5 million, while WMS saw a 12.6% increase to $30.3 million [23][25] Market Data and Key Metrics Changes - The residential construction market is experiencing a slowdown, particularly in single-family housing starts, which may impact future sales [35] - The municipal repair and replacement market remains strong, driven by the need to repair aging infrastructure [37] Company Strategy and Development Direction - The company aims to enhance operational efficiencies and customer service while navigating external challenges such as tariffs [9][16] - Focus on sustainability and innovative solutions is emphasized, with ongoing investments in facilities and employees [10][30] - The closure of the legacy brass foundry is expected to yield benefits in the upcoming quarters [14][40] Management's Comments on Operating Environment and Future Outlook - Management acknowledges heightened macroeconomic and geopolitical uncertainty but remains optimistic about achieving record results for the second consecutive year [7][9] - The anticipated impact of tariffs has been lower than initially expected, with ongoing efforts to mitigate costs through pricing actions and supply chain initiatives [14][15] - The company is excited about the long-term growth potential in water infrastructure solutions, despite current challenges [30][72] Other Important Information - The company has updated its annual guidance for 2025, increasing net sales expectations by $15 million and adjusted EBITDA by $7.5 million [27][28] - Total debt stands at $451 million, with a strong balance sheet and no debt maturities until June 2029 [26][27] Q&A Session Summary Question: Insights on end markets and stability - Management noted a slowdown in the residential construction market, particularly in single-family housing starts, while the municipal market remains strong [35][37] Question: Margin outlook and FX impact - Management indicated that the FX headwind was a one-time event and that margins are expected to improve moving forward [38][46] Question: Legacy brass foundry impact on margins - The legacy brass foundry closure is expected to improve margins, with the tariff impact being significant in the specialty valve business [44][45] Question: Infrastructure funding and market conditions - Management expressed that infrastructure funding has been slow, but the need for investment in water infrastructure remains critical [70][72] Question: Pricing actions and demand pull forward - No significant pre-buy demand was observed, and pricing adjustments have been made in response to tariffs [62][64]

Financial Performance - Q3 Fiscal 2025 - Net sales reached $380.3 million, a 6.6% year-over-year increase, driven by higher volumes and pricing across most product lines[12, 25, 30] - Gross margin increased by 150 bps year-over-year to 38.3%, driven by manufacturing efficiencies and increased volumes[12, 26, 27] - Adjusted EBITDA was $86.4 million, a 1.4% year-over-year increase, but the adjusted EBITDA margin decreased 120 bps year-over-year to 22.7%[12, 32] - Adjusted net income per diluted share increased by 6.3% year-over-year to $0.34[12, 32] - Free cash flow was $55.7 million[12] Financial Performance - Year-to-Date (YTD) Q3 Fiscal 2025 - Net sales reached $1,048.9 million, an 8.5% year-over-year increase[12] - Adjusted EBITDA was $234.4 million, a 10.5% year-over-year increase[12] - Adjusted net income per diluted share increased by 25.7% year-over-year to $0.93[12] - Free cash flow was $103.0 million[12] Fiscal Year 2025 Outlook - The company expects consolidated net sales between $1,405 million and $1,415 million, representing a 6.9% to 7.6% year-over-year growth[47, 48] - The company expects adjusted EBITDA between $318 million and $322 million, representing an 11.7% to 13.1% year-over-year growth[47, 48]

Core Insights - Mueller Water Products (MWA) reported revenue of $380.3 million for the quarter ended June 2025, reflecting a year-over-year increase of 6.6% and a surprise of +3.84% over the Zacks Consensus Estimate of $366.25 million [1] - The earnings per share (EPS) for the quarter was $0.34, slightly below the consensus estimate of $0.35, resulting in an EPS surprise of -2.86% [1] Financial Performance Metrics - Net Sales for Water Management Solutions reached $163.7 million, exceeding the two-analyst average estimate of $156 million, with a year-over-year change of +10.2% [4] - Net Sales for Water Flow Solutions amounted to $216.6 million, surpassing the $210 million average estimate, representing a year-over-year increase of +4.1% [4] - Adjusted operating income for Water Flow Solutions was reported at $60.5 million, above the average estimate of $54.5 million [4] - Adjusted operating income for Corporate was reported at -$16.1 million, compared to the average estimate of -$14 million [4] - Adjusted operating income for Water Management Solutions was $30.3 million, slightly above the estimated $30 million [4] Stock Performance - Over the past month, shares of Mueller Water Products have returned -2.2%, while the Zacks S&P 500 composite has seen a +0.6% change [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]

Core Viewpoint - Mueller Water Products reported quarterly earnings of $0.34 per share, slightly missing the consensus estimate of $0.35 per share, but showing an increase from $0.32 per share a year ago [1][2] Financial Performance - The company posted revenues of $380.3 million for the quarter ended June 2025, exceeding the Zacks Consensus Estimate by 3.84% and up from $356.7 million year-over-year [3] - Over the last four quarters, Mueller Water Products has surpassed consensus revenue estimates four times [3] Stock Performance - Since the beginning of the year, Mueller Water Products shares have increased by approximately 7.7%, outperforming the S&P 500's gain of 6.1% [4] - The stock currently holds a Zacks Rank 4 (Sell), indicating expectations of underperformance in the near future due to unfavorable estimate revisions [7] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.31 on revenues of $358.8 million, and for the current fiscal year, it is $1.23 on revenues of $1.39 billion [8] - The Steel - Pipe and Tube industry, to which Mueller Water Products belongs, is currently ranked in the top 21% of over 250 Zacks industries, suggesting a favorable industry outlook [9]