<div id="readability-page-1"><p>Watts Water Technologies <span>NYSE: WTS<span></span></span> reported record results for the fourth quarter and full year 2025, highlighting organic growth, margin expansion, and record free cash flow, while outlining a 2026 outlook that assumes market conditions broadly similar to 2025 and incorporates product rationalization actions and acquisition integration.</p><h2>Record 2025 performance and strong cash generation</h2> <p>President and CEO Bob Pagano said 2025 was “another outstanding year,” with records for sales, operating margin, and earnings per share in both the fourth quarter and the full year. In the fourth quarter, the company posted organic sales growth of 8% and reported sales growth of 16%, with adjusted operating margin rising 220 basis points to 19%. </p><p>For the full year, Watts reported organic sales growth of 5% and an adjusted operating margin of 19.6%, up 190 basis points, while continuing to invest in strategic priorities. The company generated a record $356 million in free cash flow in 2025, up 7% year-over-year, representing a conversion rate of 105% of net income. </p><p>CFO Diane McClintock said full-year 2025 sales were $2.4 billion, up 8% on a reported basis and 5% organically. She said adjusted EBITDA was $534 million, up 18%, and adjusted EBITDA margin increased 180 basis points to 21.9%. Adjusted EPS was $10.58, up 19% from the prior year. McClintock also noted after-tax charges of $22.3 million related to restructuring and acquisition-related costs, partly offset by an $8.3 million tax benefit from the reversal of a prior year tax liability. </p><p>In 2025, Watts returned $83 million to shareholders through dividends and share repurchases and increased its annual dividend payout by about 20%, according to management.  </p><h2>Fourth-quarter details by region</h2> <p>McClintock reported fourth-quarter sales of $625 million. In the Americas, organic sales rose 10% and reported sales increased 17%, which she said exceeded expectations and was supported by favorable price and volume, one additional shipping day, and growth in data center sales. Acquisitions contributed $27 million of sales in the quarter, adding seven percentage points to Americas reported growth. </p><p>In Europe, organic sales increased 1% and reported sales rose 10%, supported by pricing and the additional shipping day, with reported results also benefiting from foreign exchange. In APMEA, organic sales grew 9% and acquisitions added another 6%, resulting in 15% reported sales growth. </p><p>Adjusted EBITDA in the quarter was $134 million, up 28%, with an adjusted EBITDA margin of 21.4% (up 210 basis points). Adjusted operating income of $119 million rose 31% and adjusted EPS was $2.62, up 28%. McClintock said pricing and productivity gains more than offset inflationary pressures, volume deleverage in Europe, tariffs, and acquisition dilution.  </p><h2>Acquisitions and portfolio actions</h2> <p>Pagano said Watts completed two acquisitions since its prior earnings call: </p><ul>   <li><strong>Superior Boiler</strong>, based in Hutchinson, Kansas, which designs and manufactures customized fire tube, water tube, and condensing boilers for commercial, institutional, and industrial applications. Pagano said Superior has about $60 million in annual sales.</li>   <li><strong>Saudi Cast</strong>, located in Riyadh, Saudi Arabia, which manufactures cast iron and stainless steel drainage products for non-residential and industrial markets. Pagano said Saudi Cast has around $20 million in annual sales.</li> </ul> <p>Management said both deals are expected to be accretive to adjusted EPS in 2026 after interest expense and purchase accounting adjustments, and that integration efforts are underway. </p><p>Pagano also discussed the company’s ongoing 80/20 portfolio review under the One Watts Performance System. Watts identified $10 million to $15 million of European sales and $25 million to $30 million in the Americas—primarily in lower-margin retail and OEM channels—that it intends to eliminate during 2026. Management said the actions are expected to be neutral or potentially margin accretive in 2026. In the Q&amp;A, management clarified that the effort is focused on products and channels within the core Americas business and emphasized shifting focus toward faster-growing, higher-margin opportunities such as data centers. </p><p>Pagano also summarized Watts’ acquisition activity over the past three years, saying the company completed eight deals, deployed about $660 million in cash, and added around $450 million in annualized revenue. He said the mix shift has increased exposure to higher-growth, higher-margin non-residential, institutional, and industrial segments, and that adjusted operating margin has expanded 320 basis points over three years despite initial acquisition-related dilution.  </p><h2>Data centers and digital initiatives highlighted</h2> <p>Watts highlighted data centers as a key growth initiative. Pagano said the company’s offerings include cooling valves used to control chilled water flow, along with strainers, drainage products, and CoolVault thermal storage tanks used as emergency backup during chiller restarts. The company estimated its addressable market in data centers exceeds $1 billion. </p><p>Pagano said data center sales represented just over 3% of total company sales in 2025 and are growing at a “double-digit rate,” later characterizing that growth in Q&amp;A as the “higher end of the double digits.” He noted that Asia Pacific led the data center initiative several years ago, with the Americas now representing more than half of the business. </p><p>During Q&amp;A, management said stainless steel solutions are growing faster with the shift toward liquid cooling and that stainless products are “more of a solution” with higher margins. Pagano described the competitive landscape as having “a handful of competitors” and said Watts is “in the top three” based on the products it sells, emphasizing quality, delivery, and reputation. He also described the go-to-market model as engaging through distribution and across the value chain, including general contractors, while noting that most products are currently standardized and that more customized, technical solutions represent an evolution as relationships deepen. </p><p>Pagano also discussed Nexa, Watts’ digital strategy, saying the company completed an installation with a “very large real estate investment group” and its hospitality properties, and is expanding in hospitality, stadiums, and multifamily. He said Nexa also supports sales of core products. The CEO also said EasyWater, one of the company’s acquisitions referenced in the outlook, provides salt- and chemical-free water treatment solutions and may benefit from opportunities such as new codes in healthcare applications.  </p><h2>2026 outlook: growth with acquisition dilution and 80/20 headwinds</h2> <p>For 2026, Watts guided to reported sales growth of 8% to 12% and organic sales growth of 2% to 6%, with McClintock noting organic growth would be about two percentage points higher excluding the impact of product rationalization. By region, the company expects organic sales growth of 3% to 7% in the Americas, a 4% decline to flat in Europe, and 4% to 8% in APMEA. </p><p>McClintock said the company expects incremental sales from acquisitions of $110 million to $115 million in the Americas and $18 million to $20 million in APMEA, with an estimated $18 million foreign exchange benefit. Earlier, Pagano said acquisitions are expected to contribute more than $130 million in incremental revenues from EasyWater, Haws, Superior, and Saudi Cast, and that these additions are expected to dilute adjusted operating margin by about 50 basis points in 2026 as the One Watts Performance System is implemented and synergies are realized. </p><p>Watts guided to adjusted EBITDA margin of 21.5% to 22.1% and adjusted operating margin of 19.1% to 19.7% in 2026. Management said price, volume leverage, productivity, and restructuring savings are expected to be partially offset by inflation and acquisition dilution. Regional margin expectations include an Americas segment margin decline of 50 to 110 basis points (with about 100 basis points of acquisition dilution), Europe down 30 basis points to up 30 basis points, and APMEA up 30 to 60 basis points. The guidance assumes no change in the current tariff environment. </p><p>For free cash flow, the company expects conversion at or above 90% of net income in 2026, reflecting investments in automation across core operations and acquisitions, data center capabilities, and SAP implementation. </p><p>For the first quarter of 2026, Watts guided to reported sales growth of 12% to 16% and organic sales growth of 4% to 8%, including product rationalization headwinds of about $1 million in Europe and $6 million in the Americas. The company expects first-quarter EBITDA margin of 21.1% to 21.7% and operating margin of 18.6% to 19.2%, with acquisition dilution of about 70 basis points. </p><p>In Q&amp;A, management said it expects price to be higher early in the year due to carryover from prior tariff-related price increases—described as high single digits in the first quarter—then trending down sequentially, averaging to low single digits for the full year. Management also said it is monitoring copper prices and could consider another price increase mid-year if needed.</p><h2>About Watts Water Technologies <span>NYSE: WTS<span></span></span></h2><p>Watts Water Technologies, Inc is a global manufacturer and distributor of flow control products and solutions designed to ensure the safe, efficient delivery and use of water. Founded in 1874 and headquartered in North Andover, Massachusetts, the company has built a reputation for engineering innovation in residential, commercial and industrial plumbing, heating, cooling and water treatment systems. Watts operates through a comprehensive portfolio of brands and product lines that address application-specific requirements in water safety, pressure regulation, flow control and filtration.  </p><p>The company's product offerings span backflow preventers, pressure reducing valves, relief valves and steam traps, as well as hydronic balancing and temperature control devices for heating systems.</p><h2>Featured Articles</h2><ul><li>Five stocks we like better than Watts Water Technologies</li><li>Nvidia CEO Issues Bold Tesla Call</li><li>Your Bank Account Is No Longer Safe</li><li>Buy this Gold Stock Before May 2026</li><li>What a Former CIA Agent Knows About the Coming Collapse</li><li>New gold price target</li></ul><p><em>This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.</em></p><h2>Should You Invest $1,000 in Watts Water Technologies Right Now?</h2><p>Before you consider Watts Water Technologies, you'll want to hear this.</p><p>MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Watts Water Technologies wasn't on the list.</p><p>While Watts Water Technologies currently has a Moderate Buy rating among analysts, top-rated analysts believe these five stocks are better buys.</p><p>View The Five Stocks Here</p>                  </div>

<p>Watts Water Technologies (NYSE: WTS) reported record results for Q4 and full year 2025, with organic sales growth of 8% in Q4 and 5% for the year. The company achieved a record $356 million in free cash flow and increased adjusted EPS by 19% to $10.58. Management outlined a 2026 outlook, focusing on product rationalization and acquisitions, including Superior Boiler and Saudi Cast. The company plans to eliminate lower-margin sales channels, aiming for margin improvement. Data centers are highlighted as a key growth initiative, with ongoing investments in strategic priorities.</p>

Watts Water Technologies Q4 Earnings Call Highlights