Watts Water Technologies, Inc.

Watts Water Technologies makes products that control, conserve and protect water in residential, commercial and industrial buildings. Its valves, drainage systems, heating equipment and monitoring products serve new construction, repair and replacement markets. It trades on the New York Stock Exchange under WTS.

Latest financial results

Adjusted operating profit excludes restructuring costs and the $39.3 million pretax tariff refund received in the quarter. Adjusted earnings also exclude the related interest benefit and applicable tax effects. The refund reduced reported cost of sales because the goods carrying the original tariff costs had already been sold.

Growth and earlier expectations

Quarterly revenue grew 19%, including 12.2% organic growth. Organic sales exclude acquisition and currency effects but include price changes. The $116.3 million revenue increase comprised $74.5 million of organic growth, $41.3 million from acquired businesses and $0.5 million from currency movements.

Watts reports three geographic segments: Americas, Europe, and Asia-Pacific, Middle East and Africa. Their quarterly organic sales growth was 11.6%, 9.0% and 29.7%, respectively. Data-center and other light industrial demand supported growth, while housing and several commercial construction markets remained weak. Product discontinuations also reduced sales through Americas equipment-manufacturer and do-it-yourself channels.

For 2026, Watts forecasts reported sales growth of 17% to 18% and organic growth of 11% to 12%, up from August ranges of 14% to 17% and 8% to 11%. Its annual adjusted operating-margin range is now 20.3% to 20.4%, compared with 19.8% to 20.4% previously. Q4 guidance calls for 9% to 12% organic sales growth and a 19.1% to 19.7% adjusted operating margin.

Cash flow, debt and investment

Nine-month operating cash flow increased to $278.9 million from $247.3 million. Capital spending rose to $48.8 million from $31.3 million. Free cash flow, defined as operating cash flow less capital spending plus proceeds from property sales, was $230.2 million versus $216.0 million. Cash flow includes the tariff-refund benefit.

At September 27, cash and cash equivalents were $444.8 million. Debt was $100 million before financing-cost deductions, or $98.2 million at its balance-sheet carrying value. Watts repaid $100 million during the first nine months. Its $800 million revolving credit facility had $687.8 million available after borrowings and letters of credit and matures in July 2029.

The annual capital-spending forecast is $65 million to $70 million. Watts retained its target for free cash flow of at least 90% of reported net income; nine-month conversion was about 63%, compared with 84% a year earlier. Those figures make year-end cash conversion an important measure alongside the higher sales and profit forecasts.

Completed acquisitions

Watts completed four acquisitions in 2025: EasyWater in June, Haws and Superior Boiler in November, and Saudi Cast in late November. EasyWater, Haws and Superior Boiler joined the Americas segment; Saudi Cast joined Asia-Pacific, Middle East and Africa.

Superior Boiler's purchase price was finalized at $90 million, net of cash acquired, after a working-capital adjustment. Its purchase accounting was substantially complete at the end of Q3, with final deferred-tax refinements expected in Q4. The $1.7 million acquisition cash outflow in the first nine months of 2026 reflected closing adjustments to 2025 purchases.