Core Viewpoint - Watts Water Technologies, Inc. (WTS) reported strong financial performance in Q2 2025, with adjusted EPS of $3.09, surpassing the Zacks Consensus Estimate by 15.3% [1][8] Financial Performance - Quarterly net sales increased by 8% year over year to $644 million, exceeding the Zacks Consensus Estimate by 6.1% [2][8] - Organic sales rose by 6% year over year, driven by favorable pricing, volume, and pull-forward demand in the Americas [2][8] - Gross profit increased by 14% year over year to $325.9 million, while operating income rose by 21% to $135.3 million [9] Segment Results - **Americas**: Net sales increased by 11% to $499 million, with organic sales up 10%. Adjusted operating margin expanded by 290 basis points to 27.2% [5][8] - **Europe**: Net sales decreased by 3% to $111 million, with an 8% decline in organic sales. Adjusted operating margin improved by 170 basis points to 11.7% despite volume declines [6] - **APMEA**: Net sales decreased by 3% to $34 million, with a flat adjusted operating margin of 18.9% [7] Cash Flow and Liquidity - For the six months ended June 29, 2025, cash from operating activities was $125 million, down from $130.9 million in the prior year [10] - Free cash flow for the same period was $105.1 million, compared to $119.7 million a year ago, primarily due to higher working capital investments [11] - As of June 29, 2025, the company had $369.3 million in cash and cash equivalents and $197.3 million in long-term debt [12] Guidance - For 2025, the company expects reported sales growth between 2% and 5%, with organic sales expected to be flat to increase by 3% [13] - Adjusted EBITDA margin is forecasted to be between 20.7% and 21.3%, indicating an improvement of 60 to 120 basis points [14] - For Q3 2025, reported sales are expected to increase by 4% to 7%, with organic sales projected to rise by 2% to 5% [15] Market Performance - Shares of WTS have gained 42.3% over the past year, significantly outperforming the Zacks Instruments - Control industry, which grew by 7.9% [3]

Financial Data and Key Metrics Changes - The company reported record sales of $644 million for Q2 2025, an increase of 8% on a reported basis and 6% on an organic basis [15][9] - Adjusted operating margin reached 21.6%, up 280 basis points year-over-year, driven by favorable price cost dynamics and productivity improvements [17][10] - Adjusted earnings per share increased by 26% to $3.09, supported by operations, acquisitions, and reduced interest expenses [18][10] Business Line Data and Key Metrics Changes - Organic sales in the Americas increased by 10%, while reported sales rose by 11%, driven by price, volume, and pull forward demand [15][9] - Europe experienced an organic sales decline of 8% and reported sales down 3%, attributed to ongoing OEM and market weakness [16][10] - APMEA sales decreased by 1% on an organic basis and 3% on a reported basis, with growth in Australia and New Zealand offset by declines in China [16][10] Market Data and Key Metrics Changes - The Americas segment margin increased by 290 basis points to 27.2%, while Europe segment margins rose by 170 basis points to 11.7% [17][10] - The company expects organic sales growth of flat to up 3% for the full year, with reported sales growth anticipated to be up 2% to 5% [20][10] Company Strategy and Development Direction - The company is focusing on M&A, having acquired EasyWater, which is expected to contribute approximately $5 million in sales [11][10] - The rollout of the Nexa Intelligent Water Management solution is gaining traction, with successful installations in various sectors [12][10] - The company is committed to sustainability, having published its 2024 sustainability report highlighting progress in carbon emissions reduction and operational improvements [14][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the uncertain trade environment and expects to maintain a favorable price cost outcome despite tariff impacts [10][10] - The company is increasing its full-year sales and margin outlook due to strong first-half performance and expectations for the third quarter [13][10] - Management remains cautious about the European market, noting ongoing softness in general construction [49][10] Other Important Information - The company incurred $3.8 million in pre-tax acquisition costs and restructuring charges related to facility exits in Europe [18][10] - Free cash flow year-to-date was $105 million, down from $120 million last year, primarily due to working capital timing and increased CapEx [19][10] Q&A Session Summary Question: Impact of pull forward in sales - Management quantified the sales pull forward effect at approximately $20 million for the quarter [29][10] Question: Pricing dynamics and tariff impacts - Price realization was approximately 3% in the quarter, with expectations for mid-single digits in the second half due to implemented price increases [60][10] Question: Competitive positioning and domestic footprint - Management believes producing products in the countries they sell provides a strategic advantage, especially in the current uncertain market environment [44][10] Question: European market expectations - Management noted that destocking in the heat pump market is expected to end by Q3, but general construction remains soft in Europe [49][10] Question: Integration of acquisitions - All acquisitions are integrating well, with synergies being tracked and improvements noted across the board [66][10] Question: Nexa platform and sales cycle - The sales cycle for the Nexa platform is expected to shorten as more installations prove successful, enhancing customer understanding of the benefits [82][10]

Financial Data and Key Metrics Changes - The company reported record sales of $644 million for Q2 2025, an increase of 8% on a reported basis and 6% on an organic basis [15][16] - Adjusted EBITDA of $153 million increased by 22%, with an adjusted EBITDA margin of 23.8%, up 280 basis points [17] - Adjusted earnings per share rose by 26% to $3.09, driven by operations, acquisitions, foreign exchange, and reduced interest expense [18] Business Line Data and Key Metrics Changes - Organic sales in the Americas increased by 10%, while reported sales were up 11%, driven by price, volume, and pull forward demand [15][16] - Europe experienced an organic sales decline of 8% and reported sales down 3%, attributed to ongoing OEM and market weakness [16] - APMEA sales decreased by 1% on an organic basis and 3% on a reported basis, with growth in Australia, New Zealand, and the Middle East offset by declines in China [16] Market Data and Key Metrics Changes - The Americas segment margin increased by 290 basis points to 27.2% [17] - Europe segment margins increased by 170 basis points to 11.7% [17] - APMEA segment margin remained flat at 18.9% compared to the prior year [17] Company Strategy and Development Direction - The company is focusing on M&A, having acquired EasyWater, which is expected to contribute approximately $5 million in sales and be neutral to adjusted EPS in 2025 [11] - The rollout of the Nexa Intelligent Water Management solution is gaining traction, with successful installations in various sectors [12] - The company is committed to sustainability, having published its 2024 sustainability report highlighting progress in safety, energy efficiency, and water conservation [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current trade environment and increasing full-year sales and margin outlook due to strong first-half performance [25][26] - There is caution regarding the European market, with ongoing softness in general construction and uncertainty around order rates [49] - The company expects continued strength in data centers, which is offsetting residential market softness [94] Other Important Information - The company estimates a direct tariff impact of approximately $40 million for 2025, down from a previous estimate of $60 million [21][56] - Free cash flow year-to-date through Q2 was $105 million, with expectations for sequential improvement [19] Q&A Session Summary Question: Impact of pull forward in sales - Approximately $20 million of sales pull forward was realized in the quarter [28] Question: Pricing dynamics and tariff impacts - Price realization was approximately 3% in Q2, with expectations for mid-single digits in the second half [57] Question: Competitive positioning and domestic manufacturing - The company believes its domestic manufacturing strategy provides a competitive advantage in the current uncertain market environment [43] Question: Update on European heat pump market - Destocking in the heat pump market is expected to end by Q3, but general construction remains soft in Europe [49] Question: Changes in tariff estimates - The reduction from $60 million to $40 million in direct costs is due to changes in tariffs, including new copper tariffs [56] Question: Integration of acquisitions - All acquisitions are integrating well, with synergies being realized across the board [61] Question: Future of Nexa platform - The company expects the sales cycle for Nexa to shorten as more customers realize its benefits [77]

Q2 2025 Performance - Record sales, operating income, and EPS were achieved in Q2 2025[5] - Organic sales increased by 6% due to favorable pricing, pull-forward demand, and incremental volume[5] - The adjusted operating margin reached a record of 21.6%, representing an expansion of 280 bps[5] - Adjusted EBITDA was $153 million, a 22% increase[13] - Adjusted EPS increased by 26% to $3.09[14] Segment Performance - Americas experienced a 10% increase in organic sales, with acquisitions adding $7 million[18] - Europe saw an 8% decrease in organic sales, but benefited from a $6 million FX benefit[18] - APMEA experienced a 1% decrease in organic sales due to project timing in China[18] Financial Position - Free cash flow was $105 million, a 12% decrease compared to the previous year[15] - The net debt to capitalization ratio was negative 10%[18] - Net leverage was negative 0.4x[18] 2025 Outlook - The full-year reported sales growth outlook was raised to between +2% and +5%[19] - The full-year organic sales growth outlook was raised to between flat and +3%[19] - The full-year adjusted EBITDA margin outlook was raised to between 20.7% and 21.3%[19]

Core Insights - Watts Water reported revenue of $643.7 million for the quarter ended June 2025, reflecting a year-over-year increase of 7.8% and a surprise of +6.1% over the Zacks Consensus Estimate of $606.7 million [1] - The company's EPS for the quarter was $3.09, up from $2.46 in the same quarter last year, resulting in an EPS surprise of +15.3% compared to the consensus estimate of $2.68 [1] Financial Performance - The revenue from the Americas segment was $498.5 million, exceeding the average estimate of $472 million by two analysts, marking an 11.3% year-over-year increase [4] - The APMEA segment reported revenue of $34.2 million, slightly below the average estimate of $34.5 million, representing a year-over-year decline of 2.6% [4] - Revenue from Europe was $111 million, surpassing the estimated $108 million, but showed a year-over-year decrease of 2.7% [4] Market Performance - Shares of Watts Water have returned +3.6% over the past month, outperforming the Zacks S&P 500 composite's +0.5% change [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]

Core Insights - Watts Water (WTS) reported quarterly earnings of $3.09 per share, exceeding the Zacks Consensus Estimate of $2.68 per share, and up from $2.46 per share a year ago [1] - The earnings surprise was +15.30%, and the company has surpassed consensus EPS estimates for four consecutive quarters [2] - The company generated revenues of $643.7 million for the quarter, surpassing the Zacks Consensus Estimate by 6.10% and increasing from $597.3 million year-over-year [3] Financial Performance - The earnings surprise of +15.30% indicates strong performance relative to expectations [2] - Revenue growth of approximately 7.0% year-over-year reflects the company's ability to outperform market estimates consistently [3] - The stock has appreciated about 29.7% year-to-date, significantly outperforming the S&P 500's gain of 7.1% [4] Future Outlook - The company's earnings outlook is crucial for assessing future stock performance, with current consensus EPS estimates at $2.22 for the next quarter and $9.47 for the current fiscal year [5][8] - The favorable trend in estimate revisions prior to the earnings release has resulted in a Zacks Rank 2 (Buy) for the stock, suggesting expected outperformance in the near future [7] - The Instruments - Control industry, to which Watts Water belongs, is currently in the top 26% of Zacks industries, indicating a positive industry outlook [9]

Note changes in performance are relative to second quarter 2024 North Andover, Mass., August 6, 2025 -- Watts Water Technologies, Inc. (NYSE: WTS) – through its subsidiaries, one of the world's leading manufacturers and providers of plumbing, heating and water quality products and solutions – today announced results for the second quarter of 2025. Chief Executive Officer Robert J. Pagano Jr. said, "We delivered another strong quarter that surpassed our expectations as we achieved record sales, operating inc ...

Company Overview - Watts Water Technologies (NYSE: WTS) is a global leader in designing and manufacturing water solutions for various applications [1] - The company operates through three reportable segments: Americas, Europe, and Asia-Pacific, Middle East, and Africa (APMEA) [1] - Watts Water Technologies has a market capitalization of approximately $8.6 billion and employs nearly 1,000 people [1]

The company is expanding its go-to-market strategies with a growing pipeline and positive customer feedback on value creation through risk mitigation, water savings and enhanced comfort. In 2025, Watts Water aims to further scale its digital solutions ecosystem. The company's margin performance is also benefiting from aggressive cost reduction actions. This maker of valves for plumbing, heating and water needs is expected to post quarterly earnings of $2.68 per share in its upcoming report, which represents ...

The market expects Watts Water (WTS) to deliver a year-over-year increase in earnings on higher revenues when it reports results for the quarter ended June 2025. This widely-known consensus outlook is important in assessing the company's earnings picture, but a powerful factor that might influence its near-term stock price is how the actual results compare to these estimates. The earnings report, which is expected to be released on August 6, might help the stock move higher if these key numbers are better t ...