WTS Q3 Deep Dive: Tariffs and Acquisitions Shape Outlook Amid Record Sales

Water management manufacturer Watts Water (NYSE:WTS) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 12.5% year on year to $611.7 million. Its non-GAAP profit of $2.50 per share was 10.5% above analysts’ consensus estimates.

Is now the time to buy WTS? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Watts Water's third quarter saw revenue and profit surpassing Wall Street expectations, yet the market responded negatively, reflecting concerns over near-term headwinds. Management pointed to strong organic growth in the Americas, driven by price increases and pull-forward demand ahead of tariff adjustments, while European performance showed early signs of stabilization. CEO Robert Pagano noted, “Organic sales increased 9% in the quarter, with favorable price in the Americas, volume and pull-forward demand more than offsetting the decline in Europe.” The company also benefited from recent acquisitions and favorable foreign exchange movements, but persistent uncertainty around tariffs and supply chain disruptions weighed on sentiment.

Looking forward, Watts Water’s updated guidance is driven by continued tariff-related pricing actions, recent acquisitions, and strength in data center sales, particularly in North America. Management emphasized that ongoing supply chain volatility and the potential for further tariff adjustments remain risks. CFO Ryan Lada stated, "We are raising our full year sales and margin outlook... driven by a strong third quarter, incremental price, favorable foreign exchange and strong sales in data centers.” The company also highlighted that government policy changes and macroeconomic uncertainty could impact construction activity and the repair and replacement market, which comprises a significant share of its revenue.

Key Insights from Management’s Remarks

Management attributed the quarter’s outperformance to pricing actions in response to tariffs, acquisition contributions, and growth in key industrial end markets, while warning of ongoing macroeconomic risks and integration challenges.

• Americas pricing and demand: The Americas region led organic growth, benefiting from price increases to offset tariffs and approximately $11 million of sales pulled forward ahead of anticipated tariff changes. Management said these pricing actions helped cushion inflation and supply chain cost pressures.
• Acquisition integration progress: Recent acquisitions—including I-CON, EasyWater, and the newly closed Haws Corporation—supplemented organic growth. CEO Robert Pagano highlighted successful integration efforts, especially in leveraging Haws’ safety product line to complement the Bradley business, and stated synergy realization is tracking ahead of initial plans.
• European stabilization signs: While organic sales in Europe declined, operational restructuring and cost actions enabled margin improvement. Management believes the region is near a bottom, but cautioned that construction growth remains unlikely until geopolitical tensions, such as the war in Ukraine, subside.
• Data center market momentum: Rapid expansion in North America’s data center market offset residential softness. Pagano noted, “Our North America team is going to surpass Asia Pacific this year,” underscoring the segment's high double-digit growth and its rising importance to Watts’ overall portfolio.
• Tariff and supply chain management: The company continues to navigate uncertainty surrounding tariffs, with an estimated $40 million direct impact in 2025. Strategic price increases and supply chain initiatives are ongoing to address these external pressures, but management acknowledged that the environment remains fluid and complex.

Drivers of Future Performance

Watts Water’s outlook hinges on the ability to sustain price increases, unlock acquisition synergies, and manage ongoing tariff and supply chain volatility.

• Continued tariff-driven pricing: Management expects pricing actions taken to offset tariffs will carry over into next year, with further adjustments as tariff policies evolve. CEO Robert Pagano indicated the company will monitor tariff developments closely, as sudden policy shifts could affect both pricing and margin outcomes.
• Acquisition integration and synergy capture: The integration of Haws and other recent acquisitions is expected to generate incremental revenue and margin improvement over time. Pagano described Haws’ margin profile as currently dilutive but anticipates it will reach company averages as synergies are realized and the product mix is optimized.
• Macroeconomic and policy risks: Persistent uncertainty around government actions—such as a potential U.S. government shutdown or changes in interest rates—could slow construction and residential activity. Management also cited geopolitical developments in Europe as a risk to new construction and overall demand in that region.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will track (1) the pace and impact of acquisition integrations, particularly with Haws Corporation; (2) the ability to maintain pricing power as tariff and supply chain environments evolve; and (3) the continued growth of data center-related sales in North America. We will also monitor signals of recovery in European end markets and any changes to government or macroeconomic policy that could shift construction or repair activity.

Watts Water Technologies currently trades at $263, down from $282.43 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free for active Edge members).

Stocks That Trumped Tariffs

Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.

Take advantage of the rebound by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.