Watts Water's Q3 Earnings & Revenues Surpass Estimates, Up Y/Y

Watts Water Technologies, Inc. WTS reported third-quarter 2025 adjusted earnings per share (EPS) of $2.50 compared with $2.03 in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 9.2%.

The company’s quarterly net sales increased 13% year over year to $611.7 million. The top line beat the Zacks Consensus Estimate by 5.9%. Organic sales were up 9% year over year due to favorable prices, volume and pull-forward demand.

In the third quarter, the company acquired Haws Corporation, a leading provider of emergency safety and hydration solutions. Management stated that the addition of Haws’ innovative, specified products enhances the company’s ability to deliver broader capabilities and solutions to customers. Also, integration and synergy efforts across Bradley, Josam, I-CON and EasyWater are progressing ahead of expectations.

The company delivered a strong third quarter, driven by solid execution in the Americas, which more than offset softness in Europe. The company’s global supply chain strategy and targeted pricing actions helped mitigate tariff-related cost pressures. Based on better-than-expected performance and its fourth-quarter outlook, the company raised full-year 2025 sales and margin guidance.

Shares of the company have gained 33.1% in the past year compared with the Zacks Instruments - Control industry’s growth of 4.8%.

WTS’ Segment Results

Americas: Net sales were up 1% on a reported basis to $464 million, while organic sales jumped 13%. The I-CON and EasyWater acquisitions added $11 million in incremental sales, accounting for 3% of reported growth. Adjusted operating margin expanded 180 basis points (bps) to 23.7%, supported by favorable price realization, volume leverage, productivity gains and cost actions, which more than offset the effects of inflation, investments and tariffs.

Europe: Net sales were up 4% year over year to $112 million on a reported basis and decreased 2% on an organic basis. Sales growth was driven by favorable foreign exchange, which boosted reported sales by 6%. Organic sales declined as lower volumes in drains and ongoing market weakness outweighed pricing gains. Adjusted operating margin increased 160 bps to 12.2%, driven by improved pricing, productivity initiatives and restructuring benefits, which more than offset volume deleverage and inflation.

APMEA: Net sales decreased 1% to $36 million and were flat organically. Sales declined due to unfavorable foreign exchange, which lowered reported results by 1%. Organic sales were unchanged, with growth in Australia and the Middle East offset by softness in China and New Zealand.

Adjusted operating margin increased 90 bps to 19.4%, driven by the positive impact of productivity improvements and sales mix, which more than offset inflation.

WTS’ Other Details

Gross profit increased 16.1% year over year to $298.4 million. Selling, general and administrative expenses rose 16.4% to $298.4 million. Operating income was $111.4 million, up 19.5% year over year. Adjusted operating income was $113.3 million, up 22.1% year over year.

Operating margin expanded 110 bps to 18.2%. The adjusted operating margin was 18.5%, up 140 bps year over year. Margin performance was driven by favorable pricing, volume leverage in the Americas, productivity gains and cost actions, which more than offset volume deleverage in Europe, inflation and tariff impacts.

WTS’ Cash Flow & Liquidity

For the nine months ended Sept. 28, 2025, Watts Water generated $247.3 million of cash from operating activities compared with $221.6 million in the prior-year period.

For the nine months, free cash flow was $216 million compared with $204.2 million a year ago. Operating and free cash flow rose on higher net income and lower taxes from the One Big Beautiful Bill Act, partly offset by higher working capital and inventory costs tied to tariffs. Increased capital spending versus prior-year property sale proceeds also weighed on free cash flow. However, normal fourth-quarter seasonality is expected to drive strong operating and free cash flow.

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

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

During the third quarter of 2025, the company repurchased about 15,000 shares for $3.9 million. In the first nine months of 2025, total buybacks reached roughly 51,000 shares for $11.8 million. The company still has approximately $133 million remaining under its 2023 stock repurchase authorization, which has no expiration date.

As of Sept. 28, 2025, the company had $457.7 million in cash and cash equivalents with $197.5 million of long-term debt compared with the respective figures of $369.3 million and $197.3 million as of June 29, 2025.

WTS’ Guidance

For 2025, the company raised its outlook for sales, organic growth and margins. Reported sales are now expected to rise 7%–8% (previous guided range was between 2% and 5%), with organic sales up 4%–5% (previous guided range was from flat to an increase of 3%).

Adjusted EBITDA margin is now forecasted to be between 21.5% and 21.6%, indicating an improvement of 140 bps to 150 bps. The company had projected earlier adjusted EBITDA margin guidance to be between 20.7% and 21.3%, indicating an improvement of 60 bps to 120 bps.

Adjusted operating margin is expected at 19.1%–19.2%, up 140–150 basis points. The company had previously guided adjusted operating margin to be between 18.2% and 18.8%, implying a 50-110 bps improvement year over year.

For the fourth quarter of 2025, the company expects the adjusted operating margin to be between 17% and 17.5%, implying growth of 20-70 bps year over year. Reported sales are expected to record an increase of 9-13% and organic sales are expected to rise 4-8%. Adjusted EBITDA margin is forecasted to be 19.6% to 20.1%, indicating an improvement of 30 bps to 80 bps.

WTS’ Zacks Rank

Watts Water currently has a Zacks Rank #3 (Hold). 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 third-quarter 2025 adjusted earnings per share (EPS) of 89 cents, flat year over year. However, the bottom line topped the Zacks Consensus Estimate by 4.7%.

Revenues for the quarter reached $932 million, down 5.2% 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 ($900-$930 million) and beat the consensus estimate by 1.9%.

Shares of ST have decreased 5.4% in the past year.

Badger Meter, Inc. BMI reported earnings per share of $1.19 for third-quarter 2025, which surpassed the Zacks Consensus Estimate by 7.2%. Also, the bottom line compared favorably with the year-ago quarter’s EPS of $1.08.

Quarterly net sales were $235.7 million, up 13.1% from $208.4 million in the year-ago quarter, driven by higher utility water sales. The Zacks Consensus Estimate was pegged at $229.4 million.

Shares of BMI have declined 16.6% in the past year.

Transcat, Inc. TRNS came out with quarterly earnings of 44 cents per share, missing the Zacks Consensus Estimate of 46 cents per share. This compares to earnings of 35 cents per share a year ago. Transcat posted revenues of $82.27 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 4.05%. This compares to year-ago revenues of $67.83 million.

Shares of TRNS have declined 42.7% in the past year.

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