MWA Q2 Deep Dive: Volume Gains and Operational Efficiency Offset Tariff Headwinds

Water infrastructure products manufacturer Mueller Water Products reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 6.6% year on year to $380.3 million. The company’s full-year revenue guidance of $1.41 billion at the midpoint came in 1.1% above analysts’ estimates. Its non-GAAP profit of $0.34 per share was in line with analysts’ consensus estimates.

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StockStory’s Take

Mueller Water Products delivered a positive second quarter, with management attributing results to volume growth across core product lines, higher pricing, and improved manufacturing efficiencies. CEO Marietta Edmunds Zakas specifically highlighted resilient demand for repair products and the successful transition away from the legacy brass foundry, both of which supported gross margin expansion. The team also noted that new tariffs posed headwinds, but these were partially offset by targeted price increases and supply chain improvements.

Looking ahead, management’s updated guidance is underpinned by further operational improvements, targeted pricing actions, and the expectation that benefits from the new brass foundry will continue into next year. CFO Melissa Rasmussen explained that ongoing investments in manufacturing and additional price actions should help mitigate higher input costs from tariffs. Zakas added, “With the transition to our new brass foundry completed, we are refining plans and priorities for 2026 and beyond, focusing on operational improvements and expanded capabilities.”

Key Insights from Management’s Remarks

Management cited strong end-market demand for repair and specialty products, progress in manufacturing efficiency, and adaptive pricing as the main drivers of second quarter performance.

• Repair product strength: Robust volume growth in repair products, particularly in the Water Management Solutions segment, drove much of the quarter’s expansion and helped offset weaker service brass volumes.
• Manufacturing efficiency: The closure of the legacy brass foundry and the ramp-up of the new silicon-based foundry improved manufacturing efficiency and reduced duplicative costs, which contributed to higher gross margins.
• Tariff mitigation: Recently enacted tariffs pressured input costs, especially for specialty valves, but management implemented targeted price increases and supply chain initiatives to limit their impact.
• Backlog normalization: Channel and customer destocking, along with the resolution of earlier backlogs, led to more normalized short-cycle order patterns, reducing volatility in demand and supporting operational planning.
• Foreign currency impact: A sharp depreciation of the U.S. dollar against the Israeli shekel affected reported margins in the quarter, but management expects this to be a one-time event with limited ongoing impact.

Drivers of Future Performance

Management’s outlook for the remainder of the year is shaped by continued investments in operational efficiency, targeted price increases, and the evolving impact of tariffs.

• Operational improvements: The company expects benefits from past and future investments in foundries and manufacturing technologies to drive productivity and support gross margin expansion, particularly as cost savings from the foundry transition materialize.
• Pricing actions and tariff management: Targeted price increases for specialty and repair products are expected to help offset higher tariff-related input costs, with management prepared to take further action if needed to protect margins.
• End-market trends and funding: While municipal repair and replacement demand remains strong, management is monitoring residential construction headwinds and the slow rollout of federal infrastructure funding, both of which could influence future revenue growth and capital allocation.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will focus on (1) whether targeted pricing actions fully offset ongoing tariff pressures on specialty and repair products, (2) the pace of gross margin improvement as foundry investments deliver further cost savings, and (3) end-market demand trends in both municipal and residential segments. We will also monitor updates on federal infrastructure funding as a potential long-term growth driver.

Mueller Water Products currently trades at $26.92, up from $23.95 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).

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