Mueller is leaving water meters. Its customer promises stay.

Mueller Water Products has agreed to move its water-meter software customers to ZENNER USA. But Mueller will keep existing hardware contracts and warranties, filling those commitments with its own inventory or products bought from ZENNER.

The exit should help the maker of valves, hydrants and other water equipment earn more from each dollar of sales. Getting there will take time, and about $26 million in expected one-time charges.

The work that stays with Mueller

Management expects most of the charges in the first quarter of fiscal 2027, which began in October. They cover items including warranties, customer service, severance and inventory write-offs. Mueller has not yet estimated how much will require cash payments.

The transition should be substantially complete during fiscal 2027, although some work and costs may continue beyond that year. The company expects the move to add 1.0 to 1.4 percentage points to its adjusted EBITDA margin on an annualized basis, mainly starting in the second quarter. That measure excludes interest, taxes, depreciation, amortization and selected other costs.

A lower sales forecast with a changed starting point

Mueller's new annual sales forecast is $1.44 billion to $1.47 billion, below the $1.475 billion it just reported for fiscal 2026. The forecast excludes all metering-related financial results; that business supplied roughly $40 million of last year's sales.

The midpoint of the new sales range is roughly $20 million above last year's sales after removing those meter sales. That comparison helps explain how a smaller reported revenue figure can accompany expected growth in the remaining business.

The company expects adjusted EBITDA of $378 million to $388 million, compared with $372.2 million last year. At the forecast midpoint, the margin would rise to 26.3% from 25.2%. The plan also relies on pricing, manufacturing improvements and overhead savings, alongside the metering exit.

Higher margins, uneven demand

The latest quarter shows why costs matter. Sales fell 1.1% to $376.5 million as lower volumes outweighed price increases. Adjusted EBITDA rose 4% to $95.5 million, helped by lower overhead and manufacturing improvements. Reported net profit was nearly flat at $52.3 million, and adjusted earnings stayed at $0.38 a share.

Water Flow Solutions, which includes valves and hydrants, grew adjusted EBITDA. Water Management Solutions, which includes metering, saw that profit measure fall to $41.2 million from $45 million.

Mueller says municipal repair and replacement demand remains resilient, while new housing construction is slower. Its outlook assumes further price increases, including some not yet announced. Our Watts analysis follows how another water-equipment maker is finding growth despite weak housing.

Cash gives the transition room

Mueller ended September with $566 million in cash and $453.8 million of debt carrying value. Annual free cash flow, operating cash after capital spending, rose to $207.3 million from $172 million. Higher profit and lower cash taxes helped.

The next results will begin to show the exit costs, with most of the expected margin benefit following later. Our Mueller Water Products company profile keeps the results, earlier targets, transition commitments and financing history together.