Financial Data and Key Metrics Changes - The company achieved record sales, operating margin, and earnings per share for both Q4 and the full year 2025, with organic sales rising 8% and reported sales up 16% in Q4 [3][11] - Adjusted operating margin climbed 220 basis points to 19% in Q4, while for the full year, adjusted operating margin improved by 190 basis points to 19.6% [3][15] - Free cash flow reached a record $356 million for 2025, up 7%, with a conversion rate of 105% [4][16] Business Line Data and Key Metrics Changes - In the Americas, organic sales grew by 10% and reported growth was 17%, driven by favorable pricing and volume [11] - Europe saw organic sales rise by 1% and reported sales increase by 10%, benefiting from favorable pricing and foreign exchange effects [11] - APMEA experienced organic sales growth of 9%, with acquisitions contributing an additional 6% for a total reported sales growth of 15% [12] Market Data and Key Metrics Changes - The Americas region showed strong performance, while Europe faced challenges with a 5% decline in organic sales for the full year [14] - The company anticipates a mixed outlook for non-residential new construction in the Americas, with some growth expected in institutional and data center sectors, but weakness in offices and retail [7][17] - APMEA is projected to achieve organic growth between 4% and 8% [18] Company Strategy and Development Direction - The company continues to focus on strategic M&A, high-return organic investments, competitive dividends, and steady share buybacks [4] - The data center initiative is a key growth area, with an addressable market exceeding $1 billion and sales growing at a double-digit rate [9][10] - The company plans to phase out underperforming products, identifying $10-15 million in European sales and $25-30 million in the Americas to eliminate during 2026 [6] Management's Comments on Operating Environment and Future Outlook - Management expects market conditions in 2026 to be similar to those in 2025, with pricing and repair/replacement activity driving growth [7] - The company anticipates reported sales growth of 8%-12% and organic sales growth of 2%-6% for 2026, with specific challenges in Europe [17][18] - Management remains cautious about the European market, expecting volume to be muted and margins to be flat [62] Other Important Information - The company completed two acquisitions, Superior Boiler and Saudi Cast, which are expected to be accretive to adjusted EPS in 2026 [4][5] - The company returned $83 million to shareholders through dividends and share repurchases, increasing the annual dividend payout by approximately 20% [16] Q&A Session Summary Question: M&A Strategy and Revenue Contribution - Management emphasized that M&A is a key part of the strategy, aiming for acquisitions to be accretive to EPS in the first year and targeting a return on invested capital of 10% by year three or five [27][29] Question: Data Center Growth - Management indicated that data center sales are growing at the higher end of double digits, with a significant focus on this market [30][31] Question: Organic Growth Guidance - Management confirmed that the 80/20 revenue is included in the organic growth guidance, with expectations for price to be low single digits and volume to be offset by the 80/20 efforts [38][41] Question: Product Rationalization - Management clarified that the product rationalization involves exiting lower-margin retail and OEM channels, reallocating resources to higher-margin businesses [78][79] Question: Price and Cost Dynamics - Management expects higher prices in Q1 due to prior year tariff-related increases, with a potential for additional price increases mid-year if copper prices continue to rise [85][86]

Q4 2025 Earnings Conference Call February 12, 2026 Forward Looking Statements Record Q4 and FY performance exceeded expectations Certain statements in this presentation constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are related to forecasts of sales, margins, earnings, earnings per share, effective tax rate, capital expenditures, cash flow, water market growth, acquisition strategy and integration, construction outlook, infl ...

Financial Data and Key Metrics Changes - In Q4 2025, the company achieved 5% sales growth and marked the 15th consecutive quarter of margin expansion, with adjusted operating profit increasing by 9% to $252 million and adjusted EPS rising by 9% to $1.18 [10][17] - For the full year 2025, sales reached $4.18 billion, a 2% increase, with adjusted operating income growing by 10% and adjusted EPS increasing to a record $4.92, up 14% year-over-year [11][18] Business Line Data and Key Metrics Changes - Flow sales in Q4 increased by 9% to $394 million, with commercial and industrial sales up 12% and residential sales rising 4% [18] - Water Solutions sales decreased by 10% to $232 million in Q4, with commercial sales down 15% due to the impact of the sale of the commercial services business [20] - Pool sales grew by 11% to $393 million in Q4, driven primarily by price increases [21] Market Data and Key Metrics Changes - The North American market for Water Solutions remained relatively strong, although international and China sales experienced volatility [36] - The company expects total sales growth of approximately 3% to 4% in 2026, with flow sales projected to increase by mid-single digits to high single digits [24] Company Strategy and Development Direction - The company has strategically combined its Flow residential business with its Water Solutions residential business to enhance operational efficiencies and customer experiences [8][9] - The focus remains on innovation, sustainability, and operational excellence, with plans to invest in digital and AI-driven solutions [12][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business model and resilience of end markets, projecting adjusted EPS guidance for 2026 in the range of $5.25 to $5.40, reflecting an 8% increase at the midpoint [12][24] - The company remains vigilant in responding to macro volatility and is taking proactive steps to mitigate risks [12][22] Other Important Information - The company generated record free cash flow of $748 million and returned $225 million to shareholders through share repurchases [11][23] - The leadership transition includes Nick Brazis as the new CFO, emphasizing a commitment to disciplined execution and financial integrity [7][15] Q&A Session Summary Question: Insights on the commercial Water Solutions business - Management indicated that both Manitowoc and Everpure are expected to return to growth in 2026, with the North American market remaining strong despite international volatility [36] Question: Incremental productivity opportunities from the combination of residential flow and water - The combined business is expected to create significant margin improvement over the next several years, leveraging better channel alignment and operational efficiencies [37][39] Question: Pool business dynamics and guidance - Management noted that the guidance reflects no residential recovery in 2026, with a focus on maintaining a pragmatic approach to sales expectations [46][48] Question: Capital allocation priorities - The company plans to continue raising dividends while actively looking for strategic acquisitions and considering share buybacks as part of its capital allocation strategy [49] Question: Impact of 80/20 strategy on organic growth - Management clarified that the 80/20 strategy is expected to drive growth by focusing on high-margin customers, with no anticipated headwinds from walking away from lower-margin revenue [60] Question: Pricing strategy amidst inflation - The company aims to offset inflation through pricing while ensuring that price increases do not exceed necessary levels to maintain competitiveness [62][63]

Financial Data and Key Metrics Changes - In Q4 2025, the company achieved 5% sales growth and marked the 15th consecutive quarter of margin expansion, with adjusted operating profit increasing by 9% to $252 million and adjusted EPS rising by 9% to $1.18 [8][16] - For the full year 2025, sales reached $4.18 billion, a 2% increase, with adjusted operating income growing by 10% and adjusted EPS reaching a record $4.92, up 14% year-over-year [9][17] Business Line Data and Key Metrics Changes - Flow segment sales increased by 9% to $394 million in Q4, with commercial and industrial sales up 12% and residential sales rising 4% [17] - Water Solutions segment sales decreased by 10% to $232 million in Q4, with commercial sales down 15% due to the sale of the commercial services business [18] - Pool segment sales grew by 11% to $393 million in Q4, driven primarily by price increases [19] Market Data and Key Metrics Changes - The North American market for Water Solutions remained relatively strong, although international and China sales experienced volatility [36] - The company expects flow sales to increase by mid-single digits to high single digits in 2026, while Water Solutions sales are anticipated to be flat [23] Company Strategy and Development Direction - The company is strategically combining its flow residential business with its residential water solutions business to enhance operational efficiencies and customer experiences [6][11] - The focus remains on innovation, sustainability, and operational excellence, with plans to invest in digital and AI-driven solutions [10][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business model and resilience of end markets, projecting adjusted EPS guidance for 2026 in the range of $5.25-$5.40, reflecting an 8% increase at the midpoint [10][23] - The company remains vigilant in responding to macro volatility and is taking proactive steps to mitigate risks [10][20] Other Important Information - The company generated record free cash flow of $748 million and returned $225 million to shareholders through share repurchases [9][22] - The leadership transition includes the appointment of Nick Brazis as the new CFO, who is expected to uphold the company's financial integrity and drive shareholder value [5][22] Q&A Session Summary Question: Insights on the commercial Water Solutions business - Management indicated expectations for growth in 2026, particularly in membrane filtration, despite some volatility in international markets [36] Question: Incremental productivity opportunities from the combination of residential flow and water solutions - The combined business is expected to create significant margin improvements and growth synergies over the next several years [37] Question: Pool business dynamics and guidance for Q1 - Management noted a pragmatic approach to guidance, reflecting no residential recovery in 2026, with expectations for a flat pool year [45][46] Question: Impact of 80/20 strategy on organic growth - Management clarified that the 80/20 strategy is expected to be a tailwind for growth, focusing on high-margin customers [60] Question: Pricing strategies in light of inflation - The company aims to offset inflation through pricing while ensuring value for channel partners and customers [62] Question: Tariff impacts and supply chain adjustments - Management confirmed that they successfully mitigated tariff impacts in 2025 and expect a manageable increase in 2026 [73][74]

Core Insights - Watts Water Technologies, Inc. (NYSE:WTS) is identified as a mid-cap stock with strong investment potential, receiving an upgrade from KeyBanc from Sector Weight to Overweight, with a target price set at $340 [1][2] Company Overview - Watts Water Technologies, Inc. is based in North Andover, Massachusetts, and specializes in products such as leak protection equipment, valves, rainwater harvesting solutions, and water filtration equipment [4] Financial Outlook - KeyBanc highlights that the outlook for Watts Water Technologies in 2026 is "too compelling to ignore," particularly in light of the stock's muted response to positive revisions [2] Recent Acquisitions - The company has made two significant acquisitions: - Acquired Saudi Cast, a drainage solution producer, for $20 million, enhancing its presence in the Asia-Pacific, Middle East, and Africa regions [3] - Finalized the acquisition of Superior Boiler, which specializes in customized steam and hot water boilers and generates approximately $60 million in annual revenue [3]

Core Insights - DigitalBridge Group, Inc. (DBRG) is a global digital infrastructure investment firm focusing on data centers, cell towers, and fiber networks [1] - DBRG's financial performance shows a Return on Invested Capital (ROIC) of 9.30% and a Weighted Average Cost of Capital (WACC) of 10.97%, resulting in a ROIC to WACC ratio of 0.85, indicating inefficiencies in capital utilization [2][6] Comparative Analysis - BrightSpire Capital, Inc. (BRSP) exhibits strong capital efficiency with a ROIC of 26.94% and a WACC of 5.17%, leading to a ROIC to WACC ratio of 5.21, indicating effective value creation [3][6] - Zurn Elkay Water Solutions Corporation (ZWS) shows effective capital utilization with a ROIC of 8.93% and a WACC of 7.45%, resulting in a ROIC to WACC ratio of 1.20, suggesting returns that exceed its cost of capital [4][6] Challenges in the Industry - Alignment Healthcare, Inc. (ALHC) has a ROIC of 0.60% and a WACC of 9.03%, resulting in a low ROIC to WACC ratio of 0.07, indicating significant inefficiencies [5] - Hayward Holdings, Inc. (HAYW) has a ROIC of 6.59% and a WACC of 8.23%, leading to a ratio of 0.80, also indicating less efficient capital use [5]

Core Points - Franklin Electric Co., Inc. declared a quarterly cash dividend of $0.265 per share, payable on November 20, 2025, to shareholders of record on November 6, 2025 [1] Company Overview - Franklin Electric is a global leader in the production and marketing of systems and components for the movement of water and energy [2] - The company serves various sectors including residential, commercial, agricultural, industrial, municipal, and fueling applications [2] - Franklin Electric has been recognized in Newsweek's lists of America's Most Responsible Companies and Most Trustworthy Companies for 2024, as well as America's Climate Leaders 2024 by USA Today [2]

Core Insights - Pentair is positioned as a pure-play water company focused on moving, improving, and enjoying water through three main segments: Flow, Water Solutions, and Pool business [2][3] - The company has been on a transformation journey, successfully expanding its return on sales over several years and anticipates an inflection point leading to top-line growth starting in 2026 [3] Segment Overview - The Flow business is categorized under the "move" segment, while the "improve" segment, known as Water Solutions, is composed of one-third residential and two-thirds commercial operations [2] - The "enjoy" segment, primarily represented by the Pool business, tends to receive the most attention and visibility [2]

Financial Performance - Second quarter net sales increased by 8% year-over-year, reaching $445 million compared to $412 million in 2024[6] - Core sales also grew by 8% year-over-year in the second quarter[6] - Adjusted EBITDA for the second quarter increased by 13% year-over-year, reaching $118 million compared to $104 million in 2024, with a margin of 26.5%, up 120 bps[6] - First half net sales increased by 6% year-over-year, reaching $833 million compared to $786 million in 2024[6] - First half Adjusted EBITDA increased by 11% year-over-year, reaching $216 million compared to $194 million in 2024, with a margin of 25.9%, up 120 bps[6] - The company expects full year 2025 Adjusted EBITDA to be between $420 million and $430 million[26] - The company expects full year 2025 Free Cash Flow to be $300 million[26] Strategic Initiatives - The company launched Elkay Pro Filtration[5] - The company repurchased $33 million of shares in Q2, representing approximately 1 million shares, and $110 million in H1, representing approximately 3.2 million shares[5] - The company is navigating the tariff environment effectively[5] - The company is reducing China direct material spend and is on track to be under $30 million (2-3% of COGS) by the end of 2026[24] Sustainability Impact - 86% of revenue comes from products with sustainable attributes[12] - The company's products saved 16.6 billion gallons of water[12] - The company's filters delivered 1.2 billion gallons of safer, cleaner filtered water[12] - The company prevented 9.6 billion single-use plastic water bottles[12]

Core Insights - Xylem Inc. reported first-quarter 2025 adjusted earnings of $1.03 per share, exceeding the Zacks Consensus Estimate of 95 cents, marking a 14% year-over-year increase [1] - Revenues for the quarter reached $2.07 billion, surpassing the consensus estimate of $2.04 billion, with a 2% year-over-year growth driven by strong order growth across segments [1] - Orders totaled $2.16 billion, reflecting a 4% decrease year-over-year on a reported basis and a 2% decline on an organic basis [2] Segment Performance - Water Infrastructure segment revenues were $581 million, up 1% year-over-year, with organic sales increasing by 5% due to strong demand for water transportation and treatment solutions [2] - Applied Water segment generated revenues of $435 million, remaining flat year-over-year, with organic sales up 1% driven by the building solutions market [3] - Measurement & Control Solutions segment revenues totaled $490 million, a 6% year-over-year increase, with organic sales also up 6% due to energy metering demand [4] - Water Solutions and Services segment revenues were $563 million, flat year-over-year, with organic sales increasing by 1% supported by service offerings [4] Financial Metrics - Adjusted EBITDA for the quarter was $423 million, an 8.2% increase from the previous year, with the margin improving to 20.4% from 19.2% [5] - Adjusted operating income rose to $325 million, up 10.5% year-over-year, with the adjusted operating margin increasing to 15.7% from 14.5% [5] - Cash and cash equivalents at the end of the quarter were $1.06 billion, down from $1.12 billion at the end of December 2024, while long-term debt slightly decreased to $1.97 billion [6] Cash Flow and Shareholder Returns - Net cash generated from operating activities was $33 million, down from $89 million in the prior year, with capital expenditure at $71 million, a 4.1% decrease [7] - Xylem paid dividends of $98 million in the first quarter, an 11.4% increase year-over-year, and repurchased shares worth $12.9 million [8] 2025 Guidance - Xylem expects revenues for 2025 to be in the range of $8.7-$8.8 billion, indicating a 1-2% increase from the prior year on a reported basis and 3-4% on an organic basis [10] - Adjusted EBITDA margin is projected to be approximately 21.3-21.8%, reflecting an expansion of 70-120 basis points from the previous year [10] - Adjusted earnings are forecasted to be between $4.50 and $4.70 per share, up from $4.27 per share in 2024 [10]