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    MWA
    Earnings call· Jun 2026(Q3 FY26)

    Mueller Water Products Q3 FY26 earnings call MWA

    Aug 6, 2026 Source

    Executive summary

    Mueller Water Products Q3 FY26 — Record Performance Driven by Margin Expansion and Specialty Valve Growth

    Mueller Water Products delivered a record third quarter, driven by strong commercial execution, resilient municipal demand, and significant margin expansion. The company's Mueller Operating System is credited for improved operational efficiency and disciplined cost management, leading to raised full-year adjusted EBITDA guidance. While facing headwinds from slower residential construction and ongoing inflationary pressures, strategic investments in capacity and specialty valves are positioning the company for long-term growth.

    Highlights

    5

    • Achieved record net sales of $395.9 million, growing 4.1% year-over-year.

    • Adjusted EBITDA reached a record $107.4 million, increasing 24.3% year-over-year, with margin expanding 440 basis points to 27.1%.

    • Adjusted net income per diluted share increased 47.1% to a record $0.50, benefiting from a one-time tax benefit of $0.06 per share.

    • Free cash flow for the first 9 months increased $7.6 million to $110.6 million, representing 59% of adjusted net income.

    • Raised annual adjusted EBITDA guidance to a new range of $367 million to $372 million, implying a 25.1% margin at the midpoint.

    Concerns

    4

    • Experienced slightly lower volumes, particularly in iron gate valve and service brass, partially offsetting higher pricing.

    • Incurred $3.1 million in portfolio optimization costs and $11.2 million in strategic reorganization charges related to the i2O business exit.

    • Anticipates softer new residential construction activity during Q4 FY26, impacting short-cycle products and hydrant volumes.

    • Continued to experience elevated Section 232 tariff costs and ongoing inflationary pressures, partially offset by IEEPA tariff refunds.

    Guidance & targets

    6
    CategoryTargetConfidence
    Full-year 2026 Net Sales Growth
    2.8% and 3.5% year-over-year
    high materiality
    High
    Full-year 2026 Adjusted EBITDA
    $367 million to $372 million
    high materiality
    High
    Full-year 2026 SG&A Expenses
    $241 million to $245 million
    medium materiality
    High
    Full-year 2026 Effective Tax Rate
    between 21% and 23%
    medium materiality
    High
    Full-year 2026 Capital Expenditures
    $60 million to $65 million
    medium materiality
    High
    Full-year 2026 Free Cash Flow Conversion
    exceed 70% of adjusted net income
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Water Flow Solutions (WFS)
    Higher pricing across most product lines and volume growth in specialty valves largely offset lower iron gate valve and service brass volumes. Margin improvement reflects benefits of pricing, tariff refunds, and performance, offsetting lower volumes, inflationary pressures, and product mix.
    Adjusted EBITDA: $73.5 millionAdjusted EBITDA growth: 9.5% YoYAdjusted EBITDA margin expansion: 310 bps YoYTariff refunds impact: 140 bps
    		$215.3 million-0.6%—Adjusted EBITDA margin 34.1%
    Water Management Solutions (WMS)
    Driven by strong volume growth in hydrants and natural gas distribution products, along with higher pricing across most product lines. Margin improvement reflects benefits from higher pricing, lower SG&A (including reduced foreign currency headwinds), volume growth, and tariff refunds, offsetting performance and inflationary pressures.
    Adjusted EBITDA: $50.7 millionAdjusted EBITDA growth: 43.6% YoYAdjusted EBITDA margin expansion: 650 bps YoYTariff refunds impact: 170 bps
    		$180.6 million10.3%—Adjusted EBITDA margin 28.1%

    Operational metrics

    21
    Net sales growth
    4.1%YoY
    Q3 FY26

    Driven by higher pricing across most product lines, partially offset by slightly lower volumes.

    Gross margin
    39.4%+110 bps YoY
    Q3 FY26

    Reflects benefits of pricing actions and tariff refunds, which more than offset inflationary pressures, performance, volume impacts, portfolio optimization costs and product mix.

    Adjusted gross margin
    +30 bpsYoY
    Q3 FY26

    Demonstrates underlying benefit of pricing actions and operational execution despite challenging cost environment.

    SG&A expenses
    $64 milliondecreased $7 million YoY
    Q3 FY26

    Reflecting reduced foreign currency headwinds and lower incentive compensation expense, partially offset by continued inflationary pressures.

    Adjusted EBITDA
    $107.4 million+24.3% YoY
    Q3 FY26

    Primarily driven by pricing actions, tariff refunds and favorable SG&A cost management, which more than offset inflationary pressures, performance, volume impacts and product mix.

    Adjusted EBITDA margin
    27.1%+440 bps YoY
    Q3 FY26
    Adjusted EBITDA (TTM)
    $369 millionimproved 290 bps vs prior TTM
    TTM ended Q3 FY26
    Adjusted net income per diluted share
    $0.50+47.1% YoY
    Q3 FY26

    Benefited from lower net interest expense and a one-time tax benefit of $0.06 per diluted share.

    Effective income tax rate
    15.7%compared with 27.1% in the prior year quarter
    Q3 FY26

    Reflecting a one-time tax benefit associated with the exit of the i2O business.

    Free cash flow conversion
    59%
    9 months ended Q3 FY26
    Capital expenditures
    $43.6 millioncompared with $32.8 million in the prior year period
    9 months ended Q3 FY26

    Reflecting continued investments in iron foundries.

    Cash and cash equivalents
    $495 millionN/A
    Q3 FY26
    Total debt
    $453 millionN/A
    Q3 FY26

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

    Total liquidity
    $659 millionN/A
    Q3 FY26

    Includes $164 million of available capacity under ABL.

    Capital returned to shareholders
    $21 million
    Q3 FY26
    Portfolio optimization costs
    $3.1 million
    Q3 FY26

    Associated with the strategic exit of the i2O pressure monitoring business outside of North America, impacting WMS cost of sales.

    Strategic reorganization and other charges
    $11.2 million
    Q3 FY26

    Primarily relate to the i2O exit, including non-cash asset impairment charges, transaction-related expenses, severance, and costs associated with leadership transition.

    Tax benefit from i2O exit
    $0.06
    Q3 FY26

    Contributed to lower effective tax rate.

    Scope 1 and 2 emissions intensity reduction
    13%YoY
    FY25

    Towards a goal of 50% reduction by 2035.

    Employee engagement score
    80%
    Annual survey

    Reached goal 1 year ahead of schedule.

    Federal funding contribution to municipal investment
    <5%
    N/A

    The rest comes from state and local governments. Sunset impact expected to take multiple years to materialize.

    Industry KPIs

    5
    MetricValueDetails
    Capacity expansionN/A
    Tariff cost impact150 bpsbps
    Data center prime power demandN/A
    Order backlog order intake by segmentN/A
    Industry production market size forecastsSlower

    Orderbook & backlog

    2
    Specialty Valves BacklogN/AQ3 FY26

    N/A

    Makes up the majority of our backlog; fastest-growing category over the past few years.

    Hydrant BacklogN/AQ3 FY26

    expected to normalize in Q4 FY26

    Benefited from a backlog in hydrants throughout the first 3 quarters. We expect that, that backlog will be normalized as we enter fourth quarter.

    Product announcements

    1
    ProductTypeDetails
    Hydrant renewal systemlaunch

    Deals & partnerships

    1
    GWF AGAcquisition of certain assets and liabilities of i2O Water pressure monitoring business outside of North America.

    Completed the exit of the i2O pressure monitoring business outside of North America. GWF AG, a utility metering and smart water technology company headquartered in Switzerland, acquired certain assets and liabilities of i2O Water.

    Capital programs

    1
    Iron Foundries Investmentsunderway

    Benefit: support future productivity, capacity and operational excellence

    reflecting continued investments in our iron foundries that support future productivity, capacity and operational excellence.

    Risks & headwinds

    3
    Slower new residential construction activityQ4 FY26 and potentially into FY27

    anticipated softer activity during the fourth quarter

    Mitigation: Resilient municipal repair and replacement activity and strong growth in specialty valves are expected to partially offset; residential construction cannot stay depressed forever due to pent-up demand.

    Elevated tariff costs and inflationary pressuresongoing

    continued to experience elevated tariff costs, mainly attributable to Section 232 tariffs, along with ongoing inflationary pressures

    Mitigation: IEEPA tariff refunds helped offset a portion of impacts; strong brands and pricing power to offset costs.

    Uncertain macro environmentongoing

    broader external uncertainty

    Mitigation: Focus on what can be controlled, executing strategies, investing in growth, proactively managing costs through Mueller Operating System.

    What to watch in Q4 FY26

    5

    Residential Construction Activity

    Next quarter / FY27
    CurrentSlower activity
    TargetStabilization or rebound

    Why it matters

    Residential construction weakness impacts short-cycle products and hydrant volumes, and its recovery is a key tailwind for overall growth.

    While we anticipate softer new residential construction activity during the fourth quarter, we continue to expect resilient municipal repair and replacement activity and strong growth in specialty valves.

    Q&A highlights

    6

    How should segment contribution to the updated Q4 guidance be thought of, given the top-line decline and EBITDA growth against strong prior-year comps?

    WFS adjusted EBITDA is expected to be above prior year due to gross margin improvements, efficiencies, and price realization, but with sequential decline due to seasonality and lower short-cycle product volumes. WMS expects lower margins YoY and sequentially due to normalizing hydrant backlog, residential slowdown impact, lapping tariff pricing, and higher Section 232 tariffs offsetting IEEPA refunds.

    “For the WFS segment, we are expecting adjusted EBITDA to be above prior year due to gross margin improvements, operational efficiencies and then price realization. We're expecting to see a sequential decline from third to fourth quarter, which part of that is due to the typical seasonality decline sequentially, and we expect volumes and product mix to be a driver of that as well.”

    asked by Bryan Blair · answered by Melissa Rasmussen

    2 min read6 chapters

    Detailed Narrative

    01

    Record Q3 Performance and Margin Expansion

    Mueller Water Products achieved record net sales, adjusted EBITDA, and adjusted net income per diluted share in Q3 FY26. Net sales grew 4.1% to $395.9 million, driven by higher pricing and strong specialty valve demand. Adjusted EBITDA margin expanded 440 basis points year-over-year to a record 27.1%, primarily due to pricing actions, tariff refunds, and favorable SG&A cost management, despite inflationary pressures and volume impacts.

    02

    Mueller Operating System and Operational Excellence

    The company highlighted the Mueller Operating System as a key framework driving discipline, execution, and accountability. This system has contributed to expanding margins, strengthening cash generation, and investing in growth. The Q3 results provide further evidence of its effectiveness in reducing complexity, improving processes, and fostering continuous improvement across the organization.

    03

    Strategic Portfolio Optimization

    Mueller completed the exit of its i2O pressure monitoring business outside North America, selling certain assets and liabilities to GWF AG. This strategic move resulted in $3.1 million in portfolio optimization costs and $11.2 million in strategic reorganization charges, but also generated a one-time📎 tax benefit of approximately $0.06 per diluted share, supporting future margin expansion and free cash flow.

    04

    End Market Dynamics and Growth Drivers

    While facing slower new residential construction activity, the company benefited from resilient municipal repair and replacement demand and strong growth in project-related specialty valves. Commercial initiatives are focused on increasing market penetration for leading products and expanding into adjacent markets, particularly industrial water applications for data centers, where the company is seeing traction.

    05

    Financial Strength and Capital Allocation

    Mueller ended the quarter with a strong balance sheet, including $495 million in cash and equivalents and $659 million in total liquidity. The company continues to fund capacity and efficiency investments, such as in iron foundries, while returning $21 million to shareholders through dividends and share repurchases. Capital allocation priorities remain organic investments, targeted acquisitions, and shareholder returns.

    06

    Sustainability Achievements

    The company's 2025 sustainability report highlighted significant progress, including achieving its lowest total recordable incident rate and reducing Scope 1 and 2 emissions intensity by 13% year-over-year, totaling a 35% reduction towards a 50% goal by 2035. Employee engagement also reached 80%, one year ahead of schedule, demonstrating a strong commitment to employee well-being.

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