Watts Water's Q2 Earnings & Revenues Beat Estimates, Both Up Y/Y

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]