Skip to content
    MWA
    Earnings call· Mar 2026(Q2 FY26)

    Mueller Water Products Q2 FY26 earnings call MWA

    May 6, 2026 Source

    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

    5

    • 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

    3

    • 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

    6
    CategoryTargetConfidence
    Consolidated net sales growth
    between 2.8% and 4.2% year-over-year
    high materiality
    High
    Adjusted EBITDA
    $360 million to $365 million
    high materiality
    High
    Adjusted EBITDA margin
    more than 24.5%
    medium materiality
    High
    Total SG&A expenses
    within this updated guidance
    low materiality
    Medium
    Capital expenditures
    $60 million to $65 million
    medium materiality
    High
    Free cash flow to adjusted net income conversion
    exceed 70%
    high materiality
    Medium

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    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 million1%—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 million12.2%—Adjusted EBITDA margin 24.4%

    Operational metrics

    15
    Gross Profit
    $144.5 millionincreased 12.9% YoY
    Q2 FY26

    Driven primarily by favorable pricing, improved manufacturing efficiencies, and higher volumes. Partially offset by higher tariffs and ongoing inflationary cost pressures.

    Gross Margin
    37.6%expanded 250 bps YoY
    Q2 FY26

    Improvement driven by favorable pricing, improved manufacturing efficiencies, and higher volumes. Manufacturing efficiencies included the absence of approximately $800,000 of inventory and other asset write-downs from the prior year.

    SG&A Expenses
    $59.7 millionincreased $4 million YoY
    Q2 FY26

    Primarily reflecting unfavorable foreign currency impacts and continued inflationary pressures.

    Strategic Reorganization and Other Charges
    $4.4 million
    Q2 FY26

    Primarily related to expenses associated with leadership transition, transaction-related expenses, and severance. Excluded from adjusted results.

    Adjusted EBITDA (TTM)
    $348 million
    TTM ended Q2 FY26
    Adjusted EBITDA Margin (TTM)
    23.7%140 bps improvement vs prior 12-month period
    TTM ended Q2 FY26
    Net Interest Expense
    declined $700,000YoY
    Q2 FY26

    Driven by higher interest income.

    Effective Income Tax Rate
    25%vs 24.2% in prior year quarter
    Q2 FY26
    Net Cash Provided by Operating Activities
    decreased $20 millionYoY
    6-month period ended Q2 FY26

    Primarily driven by changes in working capital and other assets and liabilities, partially offset by higher net income and noncash adjustments.

    Capital Expenditures
    $31.9 millionvs $21.1 million in prior year period
    6-month period ended Q2 FY26

    Reflecting continued investments in iron foundries.

    Total Debt
    $452 million
    as of Q2 FY26

    No debt maturities until June 2029, with $450 million senior notes at 4% fixed interest rate.

    Cash and Cash Equivalents
    $421 million
    as of Q2 FY26
    Total Liquidity
    $585 million
    as of Q2 FY26

    No borrowings under ABL.

    Price Realization
    mid-single-digit rangeslightly higher than Q1
    Q2 FY26

    Benefited from February price actions due to commercial team execution.

    Annual Price Increase
    low single-digit
    February

    Implemented in February. Company will start to lap tariff-related price increases from Q3 and Q4 of prior year.

    Industry KPIs

    5
    MetricValueDetails
    Capacity expansion—
    Tariff cost impact—
    Dealer inventory months of supplynormalized levels
    Order backlog order intake by segmentnormalized backlog reduction
    Industry production market size forecastsdown high single to low double-digit range%

    Deals & partnerships

    1
    I2OExit 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

    4
    Anticipated slowdown in new residential construction activitycurrent 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 pressuresongoing

    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 environmentongoing

    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 impactsQ2 FY26

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

    What to watch in Q3 FY26

    5

    Residential construction activity

    next quarter
    Currentdown high single to low double-digit range
    Targetstabilization 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.

    Q&A highlights

    6

    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 read5 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.