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

Watts Water Technologies, Inc. WTS reported second-quarter 2025 adjusted earnings per share (EPS) of $3.09 compared with $2.46 in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 15.3%.

The company’s quarterly net sales increased 8% year over year to $644 million. The top line beat the Zacks Consensus Estimate by 6.1%. Organic sales were up 6% year over year, due to favorable price, volume and pull-forward demand in the Americas, mainly stemming from tariff-related price increases. 

Incremental acquisition sales in the Americas added $7 million, contributing 1% to the reported growth. Favorable foreign exchange rates increased sales by $5 million, or 1%.

Shares of the company have gained 42.3% in the past year compared with the Zacks Instruments - Control industry’s growth of 7.9%.

WTS’ Segment Results

Americas: Net sales were up 11% on a reported basis at $499 million, while organic sales jumped 10%. The I-CON and EasyWater acquisitions contributed $7 million in incremental sales, adding 1% to reported growth. Adjusted operating margin expanded 290 basis points (bps) to 27.2%, supported by favorable price realization, volume leverage, productivity gains and cost actions, which more than offset the effects of inflation investments.

Europe: Net sales were down 3% year over year to $111 million on a reported basis and 8% on an organic basis. Sales declined primarily due to lower volumes stemming from reduced heating OEM sales and continued market softness, offsetting favorable price realization. However, favorable foreign exchange movements increased reported sales by 5%. Adjusted operating margin improved 170 bps to 11.7%, as the negative impacts of volume deleverage and inflation outweighed the gains from price realization and productivity improvements.

APMEA: Net sales decreased 3% to $34 million and 1% organically. Strong growth observed in Australia, New Zealand and the Middle East, offset by project timing in China. Unfavorable foreign exchange rates reduced sales by 2%. Adjusted operating margin was flat at 18.9% as the positive impacts of productivity were offset by inflation and an unfavorable sales mix.

Watts Water Technologies, Inc. Price, Consensus and EPS Surprise

Watts Water Technologies, Inc. price-consensus-eps-surprise-chart | Watts Water Technologies, Inc. Quote

WTS’ Other Details

Gross profit increased 14% year over year to $325.9 million. Selling, general and administrative expenses declined 8% to $187.2 million. Operating income was $135.3 million, up 21% year over year.

Operating margin expanded 230 bps to 21%. The adjusted operating margin was 21.6%, up 280 bps year over year. Margin performance was driven by favorable price, volume leverage in the Americas, productivity and cost actions that offset volume deleverage in Europe and inflation.

WTS’ Cash Flow & Liquidity

For the six months ended June 29, 2025, Watts Water generated $125 million of cash from operating activities compared with $130.9 million in the prior-year period.

For the six months ended June 29, 2025, free cash flow was $105.1 million compared with $119.7 million a year ago. The decrease in operating and free cash flow was primarily driven by higher working capital investment related to the timing of accounts receivable collections and increased inventory costs related to tariffs.

During the quarter, the company repurchased approximately 18,000 shares for $4 million, taking the six-month cumulative to 37,000 shares for $7.9 million. As of quarter-end, roughly $137 million remained available under the stock repurchase program approved in 2023, which has no expiration date.

As of June 29, 2025, the company had $369.3 million in cash and cash equivalents with $197.3 million of long-term debt compared with the respective figures of $336.8 million and $197.2 million as of March 31, 2025.

WTS’ Guidance

For 2025, the company now expects reported sales growth to be between 2% and 5% (previous guided range was from a decline of 2% to an increase of 3%). It now expects organic sales to be flat to increase 3% (previous guided range was from a decline of 3% to an increase of 2%). 

Adjusted EBITDA margin is now forecasted to be between 20.7% to 21.3%, indicating an improvement of 60 bps to 120 bps. Adjusted operating margin is predicted to be between 18.2% and 18.8%, implying a 50-110 bps improvement year over year.

For the third quarter of 2025, the company expects the adjusted operating margin to be between 17.1% and 17.7%, implying growth of 0-60 bps year over year. Reported sales are expected to record an increase of 4-7% and organic sales are expected to to increase 2-5%. Adjusted EBITDA margin is forecasted to be 19.7% to 20.3%, indicating an improvement of 20 bps to 80 bps.

WTS’ Zacks Rank

Watts Water currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Performance of Peers in the Same Space

Sensata Technologies Holding plc ST reported second-quarter 2025 adjusted EPS of 87 cents compared with 92 cents a year ago. However, the bottom line beat the Zacks Consensus Estimate by 3.6%. Revenues for the quarter reached $943.4 million, down 8.9% from a year ago. The top-line contraction was attributable to earlier announced divestitures and product lifecycle optimization efforts. However, the figure outperformed management’s expectations ($910-$940 million) and beat the consensus estimate by 1.1%. Strength in Sensing Solutions cushioned the top-line performance.

Badger Meter, Inc. BMI reported EPS of $1.17 for second-quarter 2025, which missed the Zacks Consensus Estimate by 3.3%. However, the bottom line compared favorably with the year-ago quarter’s EPS of $1.12. Quarterly net sales were $238.1 million, up 10% from $216.7 million in the year-ago quarter, driven by higher utility water sales and the contribution from the SmartCover acquisition. The Zacks Consensus Estimate was pegged at $234.3 million. Badger Meter has made meaningful progress in leveraging its capabilities across SmartCover’s operations. The company is uncovering new go-to-market opportunities for SmartCover as part of its BlueEdge platform.

Transcat, Inc. TRNS reported the first quarter of fiscal 2026 EPS of 59 cents per share, beating the Zacks Consensus Estimate of 40 cents. Revenues of $76.4 million jumped 14.6%, driven by growth in both service and distribution segments. Service revenues were up 12% while Distribution revenues grew 19% due to higher demand for rentals. TRNS also recently completed the acquisition of Essco Calibration, which expands its presence in the New England market, having a large number of highly regulated life science and Aerospace & defense manufacturers. 

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