Watts Water Technologies Reports Record Sales and Strategic Growth

Watts Water ((WTS)) has held its Q3 earnings call. Read on for the main highlights of the call.

Watts Water Technologies’ recent earnings call conveyed an optimistic sentiment, underscored by record-breaking sales and robust growth in the Americas. Despite facing challenges in Europe and the APMEA region, the company remains positive about its future, bolstered by strategic acquisitions like Haws Corporation. However, ongoing uncertainties related to tariffs and supply chain disruptions were acknowledged as potential hurdles.

Record Third Quarter Sales

Watts Water Technologies celebrated a milestone with its third quarter sales reaching $612 million, marking a record for the company. This impressive figure reflects a 13% growth on a reported basis and a 9% increase organically, showcasing the company’s strong market presence and effective strategies.

Strong Performance in Americas

The Americas region stood out with a remarkable 16% increase in reported sales and a 13% rise in organic sales. This growth was driven by favorable pricing, increased volume, and approximately $11 million in pull-forward demand, highlighting the region’s significant contribution to the company’s overall success.

Successful Acquisition of Haws Corporation

The acquisition of Haws Corporation is a strategic move for Watts, expected to contribute approximately $60 million in annual sales. This acquisition enhances Watts’ product offerings in emergency, safety, and hydration solutions, strengthening its market position and value proposition.

Increased Full Year Sales and Margin Outlook

Buoyed by the strong third quarter performance, Watts has revised its full year sales and margin outlook upwards. The company now anticipates organic sales growth of 4% to 5% and reported sales growth of 7% to 8%, reflecting its confidence in sustained growth.

Improved Margins Across All Segments

Watts reported a 140 basis point increase in adjusted EBITDA margin to 20.9%. Margin improvements were noted across all segments, with the Americas at 23.7%, Europe at 12.2%, and APMEA at 19.4%, indicating efficient cost management and operational effectiveness.

Decline in Europe Sales

Despite a 4% increase in reported sales, organic sales in Europe declined by 2%, attributed to market weakness that offset price benefits. This highlights the challenges faced in the region, impacting overall performance.

Challenges in APMEA Region

The APMEA region experienced a 1% decrease in reported sales and flat organic sales, with declines in China and New Zealand counterbalancing growth in Australia and the Middle East. This underscores the mixed performance and challenges in the region.

Tariff and Supply Chain Uncertainties

Watts continues to navigate an uncertain tariff environment, with an estimated $40 million in direct tariff costs anticipated for 2025. These challenges, along with supply chain disruptions, pose potential risks to the company’s operations.

Forward-Looking Guidance

Looking ahead, Watts Water Technologies has provided an optimistic outlook for the remainder of 2025. The company expects continued strong performance, supported by strategic acquisitions and improved operating margins. With a raised sales growth outlook of 7%-8% and anticipated free cash flow conversion at or above 100% of net income, Watts is confident in delivering long-term shareholder value despite external uncertainties.

In summary, Watts Water Technologies’ earnings call highlighted a positive trajectory with record sales and strategic growth initiatives. While challenges in Europe and APMEA, along with tariff uncertainties, pose potential risks, the company’s robust performance in the Americas and strategic acquisitions provide a strong foundation for future growth.