Asked why the full-year outlook was reiterated despite WMS sales being better than expected, implying a moderated growth cadence or pull-forward.

Melissa Rasmussen explained that WMS had double-digit growth driven by pricing and hydrant/repair product volumes, benefiting from an elevated backlog. While growth is expected to continue, the first half was stronger, and WMS growth is anticipated to normalize in the latter half of the year. Paul McAndrew added that the prior year's service price backlog reduction has now flipped to hydrants. “Hydrant shipments are benefiting from an elevated backlog that we started the year with this year, despite the lower volumes associated with a slowdown in residential construction activity. We do expect to see growth in the remainder of the year. However, the first half of the year has been a stronger growth, and we expect WMS to normalize as the year progresses.”

Questioned why revenue guidance wasn't raised given strong pricing realization, asking about the expected split between price and volume and the persistence of pricing actions.

Paul McAndrew noted a low single-digit annual price increase in February and mentioned that the company would start to lap tariff-related price increases from Q3/Q4 of the prior year. Melissa Rasmussen added that price realization was in the mid-single-digit range in Q2, slightly higher than Q1, due to the February price actions. “we went up with our annual price increase in February, low single-digit. As a reminder, we had a tariff-related price increase really taking effect in Q3 and Q4 of last year. So we'll start to lap that tariff-related price as we move into the second half of the year.”

Asked for quantification of the residential slowdown's impact, whether it's a greater headwind, and its potential evolution into FY27.

Paul McAndrew stated that the company believes residential construction is down in the high single to low double-digit range, based on public homebuilder data. He acknowledged the uncertainty but noted pent-up demand for residential construction in the long term, emphasizing the company's readiness to pivot. “We still believe resi is down high single to low double-digit range. But on an external market and the outlook beyond that, there's still pent-up demand for resi construction. It's really trying to manage the uncertainty right now, and that's why I talked about in my prepared remarks that we will pivot as an organization and manage this closely.”

MWA

Mueller Water Products (MWA) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q2 FY26)· Industrials· May 6, 2026

Source: earnings call transcript

Executive summary

Mueller Water Products Q2 FY26 — Record Performance and Raised EBITDA Outlook

Mueller Water Products delivered a record-setting quarter, driven by strong pricing, manufacturing efficiencies, and resilient end-market demand, leading to a raised full-year adjusted EBITDA outlook. The company is implementing a new operating system to further drive margin expansion and growth, while actively pursuing strategic acquisitions. Management remains vigilant regarding external uncertainties, particularly the slowdown in residential construction, and is focused on operational execution and disciplined capital allocation.

Highlights

Net sales increased 5.5% to a new quarterly record of $384.4 million.
Adjusted EBITDA reached a record of $97.2 million, an increase of 15% year-over-year.
Adjusted EBITDA margin expanded 210 basis points to a new quarterly record of 25.3%.
Adjusted net income per diluted share increased 17.6% year-over-year to $0.40, setting another quarterly record.
Full-year adjusted EBITDA guidance raised by $5 million at the midpoint to $360 million to $365 million.

Concerns

Free cash flow for the six-month period decreased $30.8 million to $16.5 million, representing 15% of adjusted net income, down from 85% previously guided.
Adjusted EBITDA margin for the WMS segment contracted 20 basis points to 24.4%.
Anticipated slowdown in new residential construction activity continues to be a headwind.

Guidance & targets

Category	Target	Timeline	Confidence
Consolidated net sales growth	between 2.8% and 4.2% year-over-year high materiality	FY26 · 2026	High
Adjusted EBITDA	$360 million to $365 million high materiality	FY26 · 2026	High
Adjusted EBITDA margin	more than 24.5% medium materiality	FY26 · 2026	High
Total SG&A expenses	within this updated guidance low materiality	FY26 · 2026	Medium
Capital expenditures	$60 million to $65 million medium materiality	FY26 · 2026	High
Free cash flow to adjusted net income conversion	exceed 70% high materiality	FY26 · 2026	Medium

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Waterflow Solutions & Services (WSS) Net sales increased due to higher pricing across most product lines and increased volumes in specialty valves, partially offset by lower service brass volumes. Adjusted EBITDA growth and margin expansion were driven by manufacturing efficiencies and higher pricing, offsetting increased tariffs, inflationary pressures, and lower brass volumes. Adjusted EBITDA: $72.4 millionAdjusted EBITDA growth: 16.4% YoYAdjusted EBITDA margin expansion: 440 bps YoY	$218.3 million	1%	—	Adjusted EBITDA margin 33.2%
Water Management Solutions (WMS) Net sales increased due to higher pricing across most product lines and volume growth of hydrants and repair products, partially offset by lower volumes in applications and natural gas distribution products. Adjusted EBITDA increased from higher pricing and volume growth, but margin contracted due to increased tariffs, manufacturing inefficiencies, higher SG&A, and inflationary pressures. Adjusted EBITDA: $40.6 millionAdjusted EBITDA growth: 11.5% YoYAdjusted EBITDA margin contraction: 20 bps YoY	$166.1 million	12.2%	—	Adjusted EBITDA margin 24.4%

Deals & partnerships

I2O Exit of I2O pressure monitoring business outside of North America

Decision made to simplify business and expand margins. Impacts business operations and employees in the United Kingdom, Malaysia, and Colombia, as well as customers outside the U.S. and Canada. Pressure Management remains a strategic priority in North America, leveraging the acquired technology.

Risks & headwinds

Anticipated slowdown in new residential construction activity current and near-term

down high single to low double-digit range

Mitigation:Company will pivot as an organization and manage closely; investments in specialty valve business (less exposed to residential construction).

Higher tariffs and inflationary pressures ongoing

partially offset gross margin improvement; contributed to increased inventory levels

Mitigation:Manufacturing efficiencies and favorable pricing more than offset impact; strategic inventory build.

Increased uncertainty in the external operating environment ongoing

changes in demand, tariffs, and inflationary pressures

Mitigation:Focused on driving results, investing in capabilities and capacity, working closely with customers and suppliers to adapt.

Unfavorable foreign currency impacts Q2 FY26

increased SG&A expenses by $4 million YoY; contributed to WMS margin contraction

What to watch in Q3 FY26

Residential construction activity

next quarter

Current down high single to low double-digit range

Target stabilization or improvement

Why it matters

Residential construction is a key end market, and its continued slowdown could impact future volumes and revenue.

We still believe resi is down high single to low double-digit range. But on an external market and the outlook beyond that, there's still pent-up demand for resi construction. It's really trying to manage the uncertainty right now, and that's why I talked about in my prepared remarks that we will pivot as an organization and manage this closely.

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Q&A highlights

Inquired about the current state of channel inventory and how sell-in compares to sell-out, particularly regarding backlog changes.

Paul McAndrew stated that channel inventory is believed to be at normalized levels, with channel partners managing uncertainty. He noted a normalized backlog reduction in Q2, with a rise around the February price increase and specialty valves continuing to be a large portion of the backlog.

“In terms of how we look at channel inventory, the foresight we have in the channel inventory, we believe it's at normalized levels.”

asked by Jeffrey Reive · answered by Paul McAndrew

2 min read 5 chapters

Detailed narrative

Strategic Priorities and Mueller Operating System

Mueller Water Products introduced its new "Mueller Operating System" (MOS), a formalized set of tools and processes aimed at driving disciplined execution and excellence. This system is built on an engaged employee base, enhancing customer experience through digital tools, expanding margins via complexity reduction and strategic price-cost management, and accelerating growth through innovation and market expansion.

The company expects MOS to build on its recent momentum and further accelerate sales growth and margin expansion.

I2O Pressure Monitoring Business Exit

As part of its margin expansion strategy and business simplification, Mueller made the decision to exit the I2O pressure monitoring business outside of North America. This impacts operations in the UK, Malaysia, and Colombia. The company plans to leverage the acquired pressure technology to strengthen its competitive position in North America, where demand for pressure monitoring is growing.

Cost savings and tax benefits from this exit are expected to more than offset revenue loss and support margin expansion and enhanced free cash flow beyond 2026.

End Market Dynamics and Residential Construction

The company highlighted the continued resilience of the municipal repair and replacement market, which is expected to offset slower residential construction activity. Management is closely monitoring the anticipated slowdown in new residential construction, which they estimate to be in the high single to low double-digit range.

Despite this, they believe there is still pent-up demand for residential construction in the long term and are prepared to adapt to changing market conditions.

Free Cash Flow Headwinds

Free cash flow for the first six months of the year decreased significantly, primarily due to higher working capital, driven by increased inventory levels. This inventory build reflects higher tariffs, inflationary pressures, and strategic investments, particularly in the specialty valve product line which has a long backlog and lead time.

Consequently, the full-year free cash flow conversion guidance was lowered from 85% to over 70% of adjusted net income.

Capital Allocation and M&A Strategy

Mueller Water Products maintains a strong and flexible balance sheet with substantial liquidity, including $421 million in cash and $164 million in ABL availability. The company is actively pursuing strategic acquisitions that align with its key criteria for sales and profitability expansion and cost synergies. This disciplined approach to capital allocation balances organic investments, targeted acquisitions, and returning cash to shareholders.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.