WTS · Watts Water Technologies, Inc.

Watts Water Technologies delivered record first quarter 2026 results, with net sales reaching $677.3 million, a 21% increase on a reported basis and 12% organically compared to Q1 2025. Growth was propelled by favorable pricing, incremental volumes particularly from data center demand, $37 million in acquisition contributions (7% to reported growth), and $16 million from favorable foreign exchange (3%). Operating income rose 52% to $133.0 million, expanding GAAP operating margin to 19.6% (up 390 basis points) and adjusted to 20.1% (up 110 basis points), driven by price realization, productivity gains, and volume leverage that offset inflation, investments, tariffs, and acquisition dilution. Restructuring charges dropped significantly to $0.2 million from $17.3 million, further aiding margins. Regionally, Americas led with 23% reported sales growth ($515 million), fueled by data centers and acquisitions; Europe grew 12% reported ($121 million) via FX and price; APMEA rose 29% reported ($41 million) with acquisition and FX tailwinds. Diluted EPS climbed 34% to $2.97 on $99.6 million net income. CEO Robert J. Pagano Jr. highlighted strong execution across regions, investments in data centers and digital solutions, and productivity via the One Watts Performance System amid geopolitical and trade uncertainties. Cash flow reflected seasonality, with operating cash flow at $18 million and free cash flow at $7 million, down due to working capital buildup from higher sales, inventories for tariffs/demand, and capex. The company announced a 21% quarterly dividend hike to $0.63 per share and repurchased $3.8 million in shares, with $125 million remaining authorized. Maintaining full-year 2026 guidance signals confidence: 8-12% reported sales growth, 2-6% organic, operating margin 18.8-19.4%, adjusted 19.1-19.7%, incorporating tariff impacts but assuming short-term Middle East conflict.