Watts Water Technologies Stock Earnings Reports

Watts delivered a stronger-than-expected Q3: record third-quarter sales of $612 million (reported +13%, organic +9%), adjusted operating margin of 18.5% (+140 bps YoY) and adjusted EPS of $2.50 (+23%). Performance was led by the Americas (organic +13%) with Europe down modestly (-2% organic) and APMEA largely flat. Free cash flow year-to-date was $216 million and the company expects seasonally strong FCF in Q4 and to achieve full-year free cash flow conversion >=100% of net income. Balance sheet remains healthy (net debt to capitalization -15%, net leverage ~ -0.5x), providing capital allocation flexibility. Watts closed the acquisition of Haws Corporation (~$60M revenue), expected to be modestly dilutive to margins in year one but accretive over time as synergies are realized. Management raised full-year guidance: now expecting organic sales growth of 4%–5% (reported 7%–8%) and increased margin expansion (adjusted EBITDA/operating margin improvements of ~140–150 bps), including ~10 bps dilution from Haws. Management reiterated an estimated direct tariff impact of $40M for 2025 and said they have absorbed the cost so far through pricing and supply-chain actions. Key risks/uncertainties include the ongoing tariff environment (and potential legal outcomes), supply-chain disruptions, macro influences on new construction/global GDP, and potential impacts from a U.S. government shutdown. Growth opportunities include strong data center demand (high-double-digit growth; North America now outpacing APAC) and cross-sell/integration benefits from recent acquisitions (Bradley, Josam, I-CON, EasyWater, Haws).