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.
Is now the time to buy WTS? Find out in our full research report (it’s free for active Edge members).
Watts Water Technologies (WTS) Q3 CY2025 Highlights:
- Revenue: $611.7 million vs analyst estimates of $576.2 million (12.5% year-on-year growth, 6.2% beat)
- Adjusted EPS: $2.50 vs analyst estimates of $2.26 (10.5% beat)
- Adjusted EBITDA: $127.1 million vs analyst estimates of $116.7 million (20.8% margin, 8.9% beat)
- Operating Margin: 18.2%, up from 17.1% in the same quarter last year
- Organic Revenue rose 9.4% year on year vs analyst estimates of 3.7% growth (567.3 basis point beat)
- Market Capitalization: $9.19 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Watts Water Technologies’s Q3 Earnings Call
- Nathan Jones (Stifel) questioned the sustainability of price increases in light of tariffs. CEO Robert Pagano confirmed pricing actions will continue, with slightly higher contributions expected in Q4, and said further adjustments will depend on tariff trends.
- Nathan Jones (Stifel) inquired about the strategic rationale for acquiring Haws and its market positioning. Pagano explained Haws’ safety products complement the Bradley business and highlighted the opportunity to fill product portfolio gaps.
- Michael Halloran (R.W. Baird) asked about end-market dynamics in North America and Europe. Pagano said the company expects slow growth in both regions, with multifamily and single-family residential markets remaining subdued.
- Jeffrey Hammond (KeyBanc) probed Watts’ outlook for data center growth and its transition from Asia to North America. Pagano indicated North America data center sales will outpace Asia Pacific, driven by strong demand.
- Ryan Connors (Northcoast Research) explored the impact of potential changes to U.S. tariffs, including the scenario where tariffs are eliminated. Pagano responded that pricing and margin implications would be complex and depend on multiple factors beyond tariffs alone.
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 $276.27, down from $282.43 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).
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