Employee Engagement and Workforce - The company had approximately 5,700 employees globally as of December 31, 2025, with 3,100 in the Americas, 1,900 in Europe, and 700 in APMEA[49] - The global employee engagement survey achieved an 85% participation rate in 2025, indicating strong employee involvement[60] - The company has a robust talent management strategy, including a global employee referral bonus program and a college internship program to attract top talent[51] - The company has a diverse executive team, including a Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer, with extensive experience in various industries[76][77][79][80] - The company has expanded its leadership team with directors who have significant experience in technology, engineering, and industrial sectors[83][84][85][86] Sustainability and Environmental Impact - The company has made substantial progress in reducing its environmental impact, including a reduction in global water consumption and greenhouse gas emissions through smart monitoring systems[65] - The company is committed to high governance standards and has adopted a Code of Business Conduct applicable to all employees and Board members worldwide[67] - The company is strong focus on sustainability, with a Chief Sustainability Officer appointed to oversee these efforts[81] - The company supported various charitable organizations in 2025, including funding the construction of six AquaTowers to provide clean drinking water in Mexico, India, and the Philippines[66] - In 2025, the company was recognized as one of America's Most Responsible Companies for the seventh consecutive year and one of America's Greenest Companies for the third consecutive year[68] Product Development and Innovation - The company invested in its smart and connected product pipeline, focusing on technologies that enhance water safety and efficiency, including leak detection systems and advanced strainers[45] - The company expanded its Nexa-enabled ecosystem in 2025, integrating key hardware with its intelligent water management platform to enhance user experience[46] - The company has seen increased demand for energy-efficient products and water conservation devices due to growing concerns about climate change and sustainability[64] Financial Management and Risk - The company uses derivative financial instruments primarily to reduce exposure to adverse fluctuations in foreign exchange rates, interest rates, and costs of certain raw materials[286] - Approximately 80% to 85% of the forecasted intercompany purchases between one of the Canadian subsidiaries and U.S. operating subsidiaries are hedged using forward exchange contracts for the next twelve months[288] - The fair value of designated foreign hedge contracts outstanding as of December 31, 2025, was a liability of less than $0.1 million[288] - The company entered into an interest rate swap on March 30, 2021, with a notional amount of $100.0 million, paying a fixed rate of 1.02975%[289] - An additional interest rate swap was entered into on October 23, 2023, as part of the acquisition of Bradley, with a fixed rate of 4.844% on a notional amount of $100.0 million[289] - The company’s consolidated earnings are subject to translation risks due to changes in foreign currency exchange rates, particularly with the euro, Canadian dollar, and Chinese yuan[287] - The company does not enter into derivative financial instruments for trading purposes, adhering to a policy of using them solely for hedging underlying economic exposure[286] - The company’s non-U.S. subsidiaries transact most business in foreign currencies, primarily for purchases or sales of materials[288] Legal and Compliance - The company maintains product liability and other insurance coverage, which may not be adequate to fully protect against substantial damage claims[70] - The company has been named as a potentially responsible party for a limited number of identified contaminated sites, with environmental liabilities recorded based on the most probable cost of remediation[71] - The company is currently defending lawsuits related to asbestos exposure, with no substantial evidence found against its products[72] - The company has faced various litigation matters arising from its operations, which are being monitored and managed[73] Reporting and Transparency - The company provides free access to its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K through its website[74]

Company Overview - Watts Water Technologies, Inc. designs, manufactures, and sells water safety and flow control products aimed at promoting safety, energy efficiency, and water conservation for both commercial and residential buildings [11] - The company operates under three geographic segments: The Americas (73.6% of total revenues in Q4 2024), Europe (20.1%), and APMEA (Asia-Pacific, Middle East, and Africa) (6.3%) [11] Investment Rating - Watts Water is rated 2 (Buy) on the Zacks Rank, indicating a favorable investment outlook [12] - The company has a VGM Score of B, suggesting a balanced combination of value, growth, and momentum [12] Momentum and Earnings Estimates - The Momentum Style Score for Watts Water is A, with shares having increased by 10.5% over the past four weeks [12] - Five analysts have revised their earnings estimates upwards for fiscal 2026, with the Zacks Consensus Estimate increasing by $0.30 to $11.54 per share [12] - The company has an average earnings surprise of +11.8%, indicating strong performance relative to expectations [12] Conclusion - With a solid Zacks Rank and top-tier Momentum and VGM Style Scores, Watts Water is positioned as a strong candidate for investors' portfolios [13]

Core Insights - The performance of Watts Water's international operations is crucial for understanding its financial resilience and growth potential [1][2] Group 1: International Revenue Performance - Watts Water's total revenue for the quarter was $625.1 million, reflecting a 15.7% increase [4] - Europe contributed 19.2% of total revenue, amounting to $119.7 million, which was a surprise of +3.57% compared to expectations [5] - APMEA generated $38.8 million, representing 6.2% of total revenue, with a surprise of +10.54% over projections [6] Group 2: Revenue Forecasts - Analysts project total revenue for the current fiscal quarter to reach $615.59 million, a 10.3% increase year-over-year [7] - For the full year, total revenue is expected to be $2.64 billion, an 8.5% increase from the previous year [8] Group 3: Stock Market Performance - Over the past month, Watts Water's stock increased by 10.5%, while the S&P 500 composite decreased by 1.7% [13] - In the last three months, the company's stock price rose by 20.6%, compared to a 1.7% increase in the S&P 500 index [13]

Financial Data and Key Metrics Changes - The company achieved record sales, operating margin, and earnings per share for both Q4 and the full year 2025, with organic sales rising 8% and reported sales up 16% in Q4 [3][11] - Adjusted operating margin climbed 220 basis points to 19% in Q4, while for the full year, adjusted operating margin improved by 190 basis points to 19.6% [3][15] - Free cash flow reached a record $356 million for 2025, up 7%, with a conversion rate of 105% [4][16] Business Line Data and Key Metrics Changes - In the Americas, organic sales grew by 10% and reported growth was 17%, driven by favorable pricing and volume [11] - Europe saw organic sales rise by 1% and reported sales increase by 10%, benefiting from favorable pricing and foreign exchange effects [11] - APMEA experienced organic sales growth of 9%, with acquisitions contributing an additional 6% for a total reported sales growth of 15% [12] Market Data and Key Metrics Changes - The Americas region showed strong performance, while Europe faced challenges with a 5% decline in organic sales for the full year [14] - The company anticipates a mixed outlook for non-residential new construction in the Americas, with some growth expected in institutional and data center sectors, but weakness in offices and retail [7][17] - APMEA is projected to achieve organic growth between 4% and 8% [18] Company Strategy and Development Direction - The company continues to focus on strategic M&A, high-return organic investments, competitive dividends, and steady share buybacks [4] - The data center initiative is a key growth area, with an addressable market exceeding $1 billion and sales growing at a double-digit rate [9][10] - The company plans to phase out underperforming products, identifying $10-15 million in European sales and $25-30 million in the Americas to eliminate during 2026 [6] Management's Comments on Operating Environment and Future Outlook - Management expects market conditions in 2026 to be similar to those in 2025, with pricing and repair/replacement activity driving growth [7] - The company anticipates reported sales growth of 8%-12% and organic sales growth of 2%-6% for 2026, with specific challenges in Europe [17][18] - Management remains cautious about the European market, expecting volume to be muted and margins to be flat [62] Other Important Information - The company completed two acquisitions, Superior Boiler and Saudi Cast, which are expected to be accretive to adjusted EPS in 2026 [4][5] - The company returned $83 million to shareholders through dividends and share repurchases, increasing the annual dividend payout by approximately 20% [16] Q&A Session Summary Question: M&A Strategy and Revenue Contribution - Management emphasized that M&A is a key part of the strategy, aiming for acquisitions to be accretive to EPS in the first year and targeting a return on invested capital of 10% by year three or five [27][29] Question: Data Center Growth - Management indicated that data center sales are growing at the higher end of double digits, with a significant focus on this market [30][31] Question: Organic Growth Guidance - Management confirmed that the 80/20 revenue is included in the organic growth guidance, with expectations for price to be low single digits and volume to be offset by the 80/20 efforts [38][41] Question: Product Rationalization - Management clarified that the product rationalization involves exiting lower-margin retail and OEM channels, reallocating resources to higher-margin businesses [78][79] Question: Price and Cost Dynamics - Management expects higher prices in Q1 due to prior year tariff-related increases, with a potential for additional price increases mid-year if copper prices continue to rise [85][86]

Financial Data and Key Metrics Changes - The company achieved record sales, operating margin, and earnings per share for both Q4 and the full year 2025, with organic sales rising 8% and reported sales up 16% in Q4 [3] - Adjusted operating margin climbed 220 basis points to 19% in Q4, while for the full year, adjusted operating margin improved by 190 basis points to 19.6% [3][14] - Free cash flow reached a record $356 million for 2025, up 7%, with a conversion rate of 105% [4][16] Business Line Data and Key Metrics Changes - In the Americas, organic sales grew by 10% and reported growth was 17%, driven by favorable pricing and volume [11] - Europe saw organic sales rise by 1% and reported sales increase by 10%, benefiting from favorable pricing and positive foreign exchange effects [11] - APMEA experienced organic sales growth of 9%, with acquisitions contributing an additional 6% for a total reported sales growth of 15% [12] Market Data and Key Metrics Changes - The Americas region showed strong performance, while Europe faced challenges with a 5% decline in organic sales for the full year [14] - The company anticipates a mixed outlook for non-residential new construction in the Americas, with indicators suggesting subdued market conditions [7] - In Europe, new residential and non-residential construction is expected to remain sluggish due to uncertainties surrounding inflation and trade policies [7] Company Strategy and Development Direction - The company continues to focus on strategic M&A, high-return organic investments, competitive dividends, and steady share buybacks [4] - The data center initiative is a key growth area, with an addressable market exceeding $1 billion and sales from this sector growing at a double-digit rate [9] - The company plans to phase out underperforming products, identifying $10-15 million of European sales and $25-30 million in the Americas to eliminate during 2026 [6] Management's Comments on Operating Environment and Future Outlook - Management expects reported sales growth of 8%-12% and organic sales growth of 2%-6% for 2026, with pricing and repair/replacement activity driving growth [17] - The company anticipates challenges in Europe, projecting organic sales to range from a 4% decline to flat [18] - Management remains cautious about the operating environment, particularly in Europe, while expressing confidence in the company's ability to leverage its strengths for growth [62] Other Important Information - The company completed two acquisitions, Superior Boiler and Saudi Cast, which are expected to be accretive to adjusted EPS in 2026 [4][5] - The company returned $83 million to shareholders through dividends and share repurchases, increasing the annual dividend payout by approximately 20% [16] Q&A Session Summary Question: M&A Strategy and Revenue Contribution - Management emphasized that M&A is a key part of the strategy, with a focus on targets that fit the company's culture and financial criteria [27][28] Question: Data Center Growth - Management indicated that the data center market is a key focus, with expectations for high growth driven by ongoing construction [30][31] Question: Organic Growth Guidance - Management confirmed that the 80/20 revenue is included in the organic growth guidance, with expectations for price to be low single digits and volume to be muted [39][41] Question: Product Rationalization - Management clarified that the product rationalization efforts are focused on underperforming channels, not divestitures [88][89] Question: Capacity to Meet Data Center Demand - Management stated that they are leveraging global supply chains and facilities to meet demand from the data center market [100]

Watts Water Technologies (NYSE:WTS) Q4 2025 Earnings call February 12, 2026 09:00 AM ET Speaker9Welcome to Watts Water Technologies, Inc. fourth quarter and full year 2025 earnings call. At the end of the presentation, we will open the line for questions. I will now turn the call over to Diane McClintock, Chief Financial Officer. Please go ahead.Speaker3Thank you, and good morning, everyone. Joining me today is Bob Pagano, President and CEO. Before we begin, I'd like to remind everyone that during this call ...

Q4 2025 Earnings Conference Call February 12, 2026 Forward Looking Statements Record Q4 and FY performance exceeded expectations Certain statements in this presentation constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are related to forecasts of sales, margins, earnings, earnings per share, effective tax rate, capital expenditures, cash flow, water market growth, acquisition strategy and integration, construction outlook, infl ...

Watts Water (WTS) reported $625.1 million in revenue for the quarter ended December 2025, representing a year-over-year increase of 15.7%. EPS of $2.62 for the same period compares to $2.05 a year ago.The reported revenue compares to the Zacks Consensus Estimate of $611.3 million, representing a surprise of +2.26%. The company delivered an EPS surprise of +10.89%, with the consensus EPS estimate being $2.36.While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall ...

Core Insights - Watts Water (WTS) reported quarterly earnings of $2.62 per share, exceeding the Zacks Consensus Estimate of $2.36 per share, and up from $2.05 per share a year ago [1][2] - The company achieved a revenue of $625.1 million for the quarter, surpassing the Zacks Consensus Estimate by 2.26%, compared to $540.4 million in the same quarter last year [3] Earnings Performance - The earnings surprise for the quarter was +10.89%, following a previous surprise of +9.17% when actual earnings were $2.5 per share against an expectation of $2.29 per share [2] - Watts Water has consistently outperformed consensus EPS estimates over the last four quarters [2] Revenue Performance - The company has also exceeded consensus revenue estimates in each of the last four quarters [3] - The revenue growth reflects a significant increase from the previous year's figures, indicating strong operational performance [3] Stock Performance - Since the beginning of the year, Watts Water shares have increased by approximately 14.1%, significantly outperforming the S&P 500's gain of 1.4% [4] - The sustainability of this price movement will depend on management's commentary during the earnings call [4] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $2.64, with expected revenues of $615.59 million, and for the current fiscal year, the estimate is $11.37 on $2.61 billion in revenues [8] - The favorable trend in estimate revisions prior to the earnings release has resulted in a Zacks Rank 2 (Buy) for the stock, suggesting expected outperformance in the near future [7] Industry Context - Watts Water operates within the Zacks Manufacturing - General Industrial industry, which is currently ranked in the top 28% of over 250 Zacks industries [9] - The strong industry ranking indicates a favorable environment for the company's performance relative to its peers [9]

Financial Performance - Fourth quarter 2025 sales reached $625 million, a 16% increase on a reported basis and 8% organically[4] - Full year 2025 sales totaled $2.44 billion, up 8% on a reported basis and 5% organically[4] - Net income for 2025 was $340.8 million, up 17.0% from $291.2 million in 2024[23] - Operating income rose to $448.1 million in 2025, a 14.8% increase compared to $390.4 million in 2024[28] - Diluted EPS for Q4 2025 was $2.50, a 24% increase from $2.02 in Q4 2024; adjusted diluted EPS was $2.62, up 28%[4] - Diluted earnings per share increased to $10.17 in 2025 from $8.69 in 2024, marking a growth of 17.0%[28] - Total segment net sales for Q4 2025 reached $652.1 million, a 14.8% increase from $568.6 million in Q4 2024[29] - Net sales from external customers for the year ended December 31, 2025, were $2,438.5 million, up 8.3% from $2,252.2 million in 2024[30] Operating Metrics - Operating margin for Q4 2025 was 18.2%, an increase of 170 basis points compared to Q4 2024; adjusted operating margin was 19.0%, up 220 basis points[4] - The operating margin improved to 18.4% in 2025 from 17.3% in 2024[28] - The operating margin for the year ended December 31, 2025, improved to 18.4%, up from 17.3% in 2024[31] - Adjusted operating income for 2025 was $477.2 million, compared to $399.6 million in 2024, reflecting a 19.4% increase[28] - Segment earnings for Q4 2025 were $133.4 million, compared to $103.8 million in Q4 2024, reflecting a significant increase in profitability[29] Cash Flow and Assets - Operating cash flow for full year 2025 was $402 million, with free cash flow of $356 million, reflecting an 11% and 7% increase respectively[11] - Cash and cash equivalents at the end of 2025 were $405.5 million, an increase from $386.9 million in 2024[23] - Total current assets grew to $1,286.1 million in 2025, up 18.7% from $1,083.5 million in 2024[21] - Free cash flow for the year ended December 31, 2025, was $356.3 million, compared to $331.7 million in 2024, indicating strong cash generation[31] Acquisitions and Growth - The company completed acquisitions of Haws Corporation, Superior Boiler, and Saudi Cast, enhancing product portfolio and geographic presence[3] - Business acquisitions in 2025 amounted to $257.1 million, significantly higher than $96.3 million in 2024[23] - Full year 2026 sales growth is anticipated to range from 8% to 12% on a reported basis and 2% to 6% organically[13] - The company forecasts net sales growth of 8% to 12% for 2026, with organic sales growth projected at 2% to 6%[36] - The adjusted operating margin for 2026 is expected to be between 19.1% and 19.7%, indicating a focus on operational efficiency[36] Balance Sheet and Equity - Total assets increased to $2,881.2 million in 2025 from $2,397.0 million in 2024, representing a growth of 20.2%[21] - Total stockholders' equity reached $2,027.7 million in 2025, up from $1,707.9 million in 2024, indicating a 18.7% increase[21] - The net debt to capitalization ratio improved to (11.4)% as of December 31, 2025, compared to (12.5)% in 2024, reflecting a stronger balance sheet[34] Regional Performance - Americas segment sales were $467 million, a 17% increase on a reported basis and 10% organically, driven by favorable pricing[8] - Europe segment sales increased to $120 million, a 10% rise on a reported basis, with a 1% organic growth[9] - APMEA segment sales reached $39 million, a 15% increase on a reported basis and 9% organically, with growth across major countries[10] Special Items - The corporate operating loss excluding special items for Q4 2025 was $(14.7) million, compared to $(12.9) million in Q4 2024[29] - The dollar change in net sales for Q4 2025 was $84.7 million, with a net sales percentage increase of 15.7% year-over-year[30]