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Mueller Water Products, Inc. (MWA)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered record net sales at $380.3M (+6.6% y/y) and gross margin of 38.3% (+150 bps y/y), with diluted EPS of $0.33 and adjusted EPS of $0.34 .
  • Consensus check: revenue beat ($380.3M vs $367.8M*), EPS modestly above Primary EPS mean ($0.34 vs $0.338*), while adjusted EBITDA was slightly below consensus ($86.4M vs $88.4M*) .
    Values retrieved from S&P Global.
  • FY25 guidance raised: net sales to $1.405–$1.415B (from $1.390–$1.400B in Q2), adjusted EBITDA to $318–$322M (from $310–$315M in Q2), with Capex lifted to $50–$52M .
  • Management highlighted tariff impacts (updated annualized impact now ~3–4% of cost of sales) and FX headwinds ($7.7M in Q3), but noted mitigating pricing actions and supply chain/operational efficiencies; closing the legacy brass foundry is expected to further benefit margins into Q4 and FY26 .

What Went Well and What Went Wrong

  • What Went Well

    • Record quarter for net sales, gross margin and adjusted EBITDA; gross margin exceeded 38% with a 320 bps sequential improvement, driven by higher orders and manufacturing efficiencies .
      “Our gross margin exceeded 38% this quarter, reflecting a significant sequential improvement of 320 basis points.” — CEO Martie Zakas .
    • Pricing actions and operational execution offset tariff pressures, and legacy brass foundry closure benefits began to flow through with further improvements expected in Q4/FY26 .
    • Strong segment contributions: WFS operating margin 27.9% and WMS adjusted operating margin improved to 18.5%; hydrants and repair products volume strength supported WMS .

  • What Went Wrong

    • FX headwinds were significant ($7.7M unfavorable in Q3, largely USD vs ILS), depressing adjusted operating and EBITDA margins; excluding FX, adjusted operating margin would have been 21.7% and adjusted EBITDA margin 24.7% .
    • Tariffs created unfavorable price/cost, especially in specialty valve and repair products; updated tariff impact now ~3–4% of cost of sales .
    • Service brass volumes and natural gas distribution products were lower due to backlog normalization and channel destocking, pressuring WFS and WMS mix .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$304.3 $364.3 $380.3
GAAP Diluted EPS ($)$0.22 $0.33 $0.33
Adjusted Diluted EPS ($)$0.25 $0.34 $0.34
Gross Margin %33.9% (computed from $103.0/$304.3) 35.1% (computed from $128.0/$364.3) 38.3%
Operating Margin %15.6% 19.2% 19.4%
Adjusted EBITDA ($USD Millions)$63.5 $84.5 $86.4
Adjusted EBITDA Margin %20.9% 23.2% 22.7%

Actuals vs Consensus (S&P Global):
Values retrieved from S&P Global.

MetricQ1 2025Q2 2025Q3 2025
Revenue Consensus Mean ($USD Millions)*$293.1*$351.0*$367.8*
Reported Revenue ($USD Millions)$304.3 $364.3 $380.3
Primary EPS Consensus Mean ($)*$0.193*$0.310*$0.338*
Reported Adjusted Diluted EPS ($)$0.25 $0.34 $0.34
EBITDA Consensus Mean ($USD Millions)*$57.0*$80.6*$88.4*
Reported Adjusted EBITDA ($USD Millions)$63.5 $84.5 $86.4

Segment Performance

Segment MetricQ3 2024Q2 2025Q3 2025
Water Flow Solutions – Net Sales ($MM)$208.1 $216.2 $216.6
Water Flow Solutions – Operating Margin %27.8% 25.0% 27.9%
Water Flow Solutions – Adjusted EBITDA ($MM)$66.9 $62.2 $67.1
Water Flow Solutions – Adjusted EBITDA Margin %32.1% 28.8% 31.0%
Water Management Solutions – Net Sales ($MM)$148.6 $148.1 $163.7
Water Management Solutions – Operating Margin %17.2% 21.1% 18.4%
Water Management Solutions – Adjusted EBITDA ($MM)$34.0 $36.4 $35.3
Water Management Solutions – Adjusted EBITDA Margin %22.9% 24.6% 21.6%

KPIs and Balance Sheet

KPIQ1 2025Q2 2025Q3 2025
Free Cash Flow ($MM, quarter)$42.2 $5.1 $55.7
Net Cash Provided by Operating Activities ($MM, YTD)$54.1 $68.4 $135.8
Capital Expenditure ($MM, YTD)$11.9 $21.1 $32.8
Cash and Cash Equivalents ($MM)$338.2 $329.2 $372.0
Total Debt ($MM)$449.5 $450.5 $450.8
Net Debt ($MM)$111.3 $121.3 $78.8
Debt Leverage (Debt/TTM Adj. EBITDA, x)1.5x 1.5x 1.5x
Net Debt Leverage (Net Debt/TTM Adj. EBITDA, x)0.4x 0.4x 0.3x

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Consolidated Net Sales ($B)FY 2025$1.390–$1.400 (as of Q2) $1.405–$1.415 Raised
Adjusted EBITDA ($MM)FY 2025$310–$315 (as of Q2) $318–$322 Raised
Free Cash Flow (% of Adjusted Net Income)FY 2025>80% >80% Maintained
Total SG&A ($MM)FY 2025$236–$240 (as of Q2) $245–$247 (assumes no FX impact in Q4) Raised
Net Interest Expense ($MM)FY 2025$9–$10 (as of Q2) $7.5–$8.0 Lowered
Effective Tax Rate (%)FY 202524%–26% (as of Q2) 25%–26% Slightly higher range midpoint
Depreciation & Amortization ($MM)FY 2025$44–$45 (as of Q2) $45–$46 Raised
Capital Expenditures ($MM)FY 2025$45–$50 (as of Q2) $50–$52 Raised
Pension benefit other than service ($MM)FY 2025~$0.2 ~$0.2 Maintained
Dividend per share ($)Q3 declaration—$0.067 (payable Aug 21, 2025) Declared

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Tariffs / Price-CostExpected cost increases; mitigation via pricing, supply chain plans (Q2) Annualized tariff impact updated to ~3–4% of cost of sales; price actions and efficiencies mitigating; specialty valves/repair most impacted Improving mitigation; lower-than-expected impact
Supply Chain & ManufacturingBrass foundry transition underway; manufacturing inefficiencies noted (Q2) Sequential gross margin +320 bps; efficiencies from foundry closure to continue into Q4 and FY26 Positive execution momentum
Pricing ActionsAnnual price increase in Feb; targeted tariff-related actions (Q2) Targeted pricing (including reductions in certain specialty valve/repair lines) to address tariff shifts; carryover into FY26 Dynamic, responsive pricing
FX / CurrencyFX favorable earlier; not material (Q1) $7.7M unfavorable FX (USD vs ILS) in Q3; assuming no FX impact in Q4 guidance One-time Q3 headwind; cautious outlook
End-Markets: ResidentialStable/healthy earlier in FY25 (Q1–Q2) Anticipated slowdown in Q4; single-family housing starts soft; could extend into FY26 depending on rates Moderating
End-Markets: Municipal Repair/ReplacementResilient and strong; funding avenues intact (Q1–Q2) Continues strong; largest exposure remains robust Stable/Strong
Infrastructure Funding (IIJA/BABA)Benefits not assumed in FY25; slow allocations (Q1) Still slower than expected; stricter BABA compliance; could be a few years out; state ballot initiatives supportive Delayed but supportive medium term
Backlog & Channel InventoryElevated prior-year backlogs normalizing (Q2) Short-cycle backlogs now normalized; specialty valve backlog healthy Normalized
Capex / FoundriesLarge capital projects behind; continued foundry investments (Q2) Capex raised for FY25; higher capital planned in FY26–FY27 for mature foundries Increasing investments

Management Commentary

  • “We achieved an impressive third quarter, setting new records for consolidated net sales, gross margin and adjusted EBITDA… Our gross margin exceeded 38%… despite the challenges posed by the recently enacted tariffs.” — CEO Martie Zakas .
  • “Our updated annual guidance positions us to deliver record results for a second consecutive year… updated estimates for the annualized tariff impact decreased to approximately 3% to 4% of our cost of sales.” — COO Paul McAndrew .
  • “Excluding the $7.7 million unfavorable foreign currency impact… adjusted operating margin would have been 21.7%… adjusted EBITDA margin was 24.7%, 80 bps higher than the prior year.” — CFO Melissa Rasmussen .

Q&A Highlights

  • Margin trajectory and FX: Management emphasized Q3 FX was unusually large (USD vs ILS ~10% move), with minimal FX assumed in Q4; excluding FX, margins would have expanded versus last year .
  • Pricing and demand: Targeted pricing implemented around tariffs; limited evidence of customer pre-buy; demand steady without meaningful pull-forward .
  • Backlog and visibility: Short-cycle backlog normalized; specialty valve backlog at healthy, normal levels; WFS faces service brass headwinds offset by iron gate/specialty valves .
  • FY26 setup: Carryover of February price increases and targeted tariff-related pricing into FY26; foundry closure benefits continue; WMS repair/installation margins expected to move closer to pre-war levels in FY26 .

Estimates Context

  • Q3 2025 vs S&P Global consensus: Revenue beat ($380.3M vs $367.8M*), Primary EPS slightly above ($0.34 vs $0.338*), adjusted EBITDA slightly below ($86.4M vs $88.4M*) .
  • Q2 and Q1 also exceeded consensus revenue and EPS; adjusted EBITDA beat Q1 and Q2 but moderated in Q3 due to FX/tariff mix effects .
    Values retrieved from S&P Global.

Key Takeaways for Investors

  • Strong execution with record revenue and gross margin; excluding FX, margins would have expanded further — supports confidence in pricing power and operational initiatives .
  • Bold guidance raise for FY25 revenue and adjusted EBITDA signals momentum into year-end; Capex uplift and foundry investments set the stage for medium-term margin expansion .
  • Tariff impact revised down to ~3–4% of cost of sales; targeted pricing and supply chain actions appear effective — watch specialty valves/repair product mix .
  • Residential exposure likely to soften into Q4/FY26 amid rate-sensitive single-family starts; municipal repair/replacement remains resilient and the largest driver .
  • FX is a swing factor (Q3 Israel shekel impact); with no Q4 FX assumed in guidance, upside/downside exists depending on currency path .
  • Free cash flow and balance sheet strength (net debt leverage 0.3x) provide flexibility for continued shareholder returns (dividend declared) and capital investments .
  • Near-term trading: potential positive reaction to guidance raise and margin narrative; medium-term thesis hinges on continued execution, tariff management, and normalization of WMS margins toward pre-war levels .