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Mueller Water Products, Inc. (MWA)·Q4 2025 Earnings Summary

Executive Summary

  • Record Q4 results: net sales $380.8M (+9.4% YoY), adjusted EBITDA $91.8M (+26.6% YoY), and adjusted EPS $0.38 (+72.7% YoY), with gross margin up 500 bps to 36.8% .
  • Broad beats vs Street: revenue ($380.8M vs $362.1M*), EPS ($0.38 vs $0.338*), and EBITDA ($91.8M vs $85.6M*) for Q4; Q3 also beat on revenue/EPS, slight EBITDA miss; Q2 beat across all three* .
  • FY2026 guidance introduced: net sales $1.45–$1.47B, adjusted EBITDA $345–$350M (midpoint margin 23.8%), FCF >85% of adjusted net income; capex $60–$65M, SG&A $243–$247M, tax rate 25–27% .
  • CEO transition: Martie Zakas to retire effective Feb 9, 2026; COO Paul McAndrew to lead multi‑year capex in iron foundries (4–5% of sales) with no 2026 margin benefit anticipated .

What Went Well and What Went Wrong

What Went Well

  • Gross margin expansion: Q4 gross margin 36.8% (+500 bps YoY) on manufacturing efficiencies, favorable price‑cost, and volumes .
  • Segment strength: WFS adjusted operating income up 32.5% to $55.1M; WMS adjusted operating income up 33.6% to $39.8M; both segments posted record adjusted EBITDA margins for Q4 .
  • Management tone: “Record‑breaking performance… adjusted EBITDA margin exceeding 24%,” underscoring confidence in continued margin expansion into FY2026 .

What Went Wrong

  • Tariff headwinds: FY2026 annualized tariff impact expected ~3% of cost of sales; pricing/supply chain actions in place to offset .
  • Warranty and reorg costs: Q4 included a $5.6M metering warranty charge (WMS) and $3.7M strategic reorganization charges excluded from adjusted results .
  • Residential softness: FY2026 planning assumes residential construction down high single digits; muni repair/replacement and specialty valves to offset .

Financial Results

Quarterly Metrics (oldest → newest)

MetricQ2 2025Q3 2025Q4 2025
Revenue ($USD Millions)$364.3 $380.3 $380.8
Gross Margin %35.1% 38.3% 36.8%
Adjusted EBITDA ($USD Millions)$84.5 $86.4 $91.8
Adjusted EBITDA Margin %23.2% 22.7% 24.1%
GAAP Diluted EPS ($USD)$0.33 $0.33 $0.33
Adjusted EPS ($USD)$0.34 $0.34 $0.38

Q4 vs Prior Year and Prior Quarter

MetricQ4 2024Q3 2025Q4 2025
Revenue ($USD Millions)$348.2 $380.3 $380.8
Adjusted EBITDA ($USD Millions)$72.5 $86.4 $91.8
Adjusted EBITDA Margin %20.8% 22.7% 24.1%
Adjusted EPS ($USD)$0.22 $0.34 $0.38

Segment Breakdown (Q4 2025)

SegmentNet Sales ($USD Millions)Adjusted Operating Income ($USD Millions)Operating Margin %Adjusted EBITDA ($USD Millions)Adjusted EBITDA Margin %
Water Flow Solutions (WFS)$217.5 $55.1 25.3% $62.7 28.8%
Water Management Solutions (WMS)$163.3 $39.8 24.4% (adj) $45.0 27.6%

KPIs

KPIValue
Q4 Free Cash Flow ($USD Millions)$69.0
Q4 Operating Cash Flow ($USD Millions)$83.5
Cash and Cash Equivalents (FY-end) ($USD Millions)$431.5
Total Debt (FY-end) ($USD Millions)$451.6
Net Debt (FY-end) ($USD Millions)$20.1
Liquidity (FY-end) ($USD Millions)$595
Dividend per Share (new rate) ($USD)$0.070 (from $0.067)
Q4 Adjustments (excluded from adjusted results)$5.6M warranty (WMS); $3.7M reorg

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($USD Billions)FY2026—$1.450–$1.470 New
Adjusted EBITDA ($USD Millions)FY2026—$345–$350 New
Adjusted EBITDA Margin %FY2026—23.8% midpoint New
SG&A ($USD Millions)FY2026—$243–$247 New
Net Interest ($USD Millions)FY2026—$6–$7 New
Effective Tax RateFY2026—25–27% New
Depreciation & Amortization ($USD Millions)FY2026—$47–$49 New
Capital Expenditures ($USD Millions)FY2026—$60–$65 New
Free Cash Flow (% of Adjusted Net Income)FY2026—>85% New
Tariff Impact (% of Cost of Sales)FY2026—~3% New
Capex as % of Net SalesFY2026–FY2028—4–5% (multi‑year plan) New
Net Sales ($USD Billions)FY2025$1.390–$1.400 $1.405–$1.415 Raised
Adjusted EBITDA ($USD Millions)FY2025$310–$315 $318–$322 Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2025)Previous Mentions (Q3 2025)Current Period (Q4 2025)Trend
Tariffs/macroAnnualized impact initially 8–9% of cost of sales; targeted price actions planned Impact estimate reduced to ~3–4% of cost of sales; FX headwind in WMS FY2026 tariff impact ~3% of cost of sales with offsets via pricing and ops Improving mitigation
Brass foundry transitionRunning dual foundries drove Q2 inefficiencies; benefits expected in H2 Sequential gross margin benefit; closure to aid Q4 and FY2026 Residual benefits in 1H FY2026; continued margin expansion Positive
End‑markets (Muni vs Residential)Muni resilient; residential uncertainty rising into Q4 Muni strong; backlog normalization underway Residential down HSD; muni repair/replacement LSD–MSD growth; specialty valves MSD–HSD growth Mixed (resi down, muni stable)
Pricing actionsAnnual price increase (Feb) plus targeted double‑digit increases on specialty/repair Price actions benefit in Q4; FX and tariffs weighed Q3 FY2026 guidance excludes new pricing; carryover from FY2025 actions Ongoing
FXFavorable FX helped Q2 SG&A $7.7M unfavorable FX headwind in Q3 (ILS/USD) Expect not to repeat 2025 FX impact in 2026 Easing
Capex and capacityCapex 3–4% of sales; focus on foundries Increasing capex to strengthen domestic capacity 4–5% of sales for next 3 years; no margin benefit in 2026 from these projects Step‑up
Innovation/leak detectionESG progress; brass alloy; leak detection achievements —Hydrant renewal product with embedded Ecologix monitoring, pilots underway Building

Management Commentary

  • “We closed the year on an exceptional note… adjusted EBITDA margin exceeding 24%” — CEO Martie Zakas .
  • “Planned equipment upgrades… increase capital expenditures to 4–5% of net sales over the next three years” — President/COO Paul McAndrew .
  • “Adjusted EBITDA will range from $345–$350 million… achieving a 23.8% margin for the year” — CFO Melissa Rasmussen (FY2026 guidance) .
  • “Hydrant renewal… including Ecologix monitoring technology… pilot phase with roll‑out in 2026” — CEO on product innovation .

Q&A Highlights

  • FY2026 end‑market assumptions: residential down HSD; muni repair/replacement LSD–MSD growth; specialty valves MSD–HSD growth; net effect slightly positive volumes .
  • Capex program: multi‑year upgrades to two 50‑year‑old iron foundries; no margin benefit in 2026; aimed at capacity and future margin expansion .
  • Tariffs: annualized ~3% of cost of sales; offset via targeted pricing and supply chain/operational initiatives .
  • Warranty accrual: $5.6M charge tied to metering; long warranty periods; periodic third‑party analysis .
  • Channel/backlog: inventory normalized; monitoring for tariff‑related buy‑ahead; specialty valves backlog at normal levels .
  • Government shutdown: minimal direct impact; infrastructure bill rollout slower; not in FY2026 assumptions .

Estimates Context

  • Q4 2025 vs Consensus: revenue $380.8M vs $362.1M*, EPS $0.38 vs $0.338*, EBITDA $91.8M vs $85.6M* — broad beats; revenue beat also in Q3; EBITDA slight miss in Q3 ($86.4M vs $88.4M*); Q2 beat across all three* .
  • FY2026 consensus: revenue ~$1.468B*, EPS ~$1.388*, EBITDA ~$348.8M* — broadly consistent with company guidance midpoint .
MetricQ2 2025Q3 2025Q4 2025
Consensus Revenue ($USD Millions)*351.0*367.8*362.1*
Actual Revenue ($USD Millions)364.3 380.3 380.8
Consensus EPS ($USD)*0.310*0.338*0.338*
Adjusted EPS ($USD)0.34 0.34 0.38
Consensus EBITDA ($USD Millions)*80.6*88.4*85.6*
Actual Adjusted EBITDA ($USD Millions)84.5 86.4 91.8
# of Estimates (Revenue / EPS)*6 / 6*6 / 6*6 / 6*

Values marked with an asterisk (*) were retrieved from S&P Global.

Key Takeaways for Investors

  • Margin momentum intact: Q4 adjusted EBITDA margin 24.1%, with structural tailwinds from foundry transition and productivity programs supporting FY2026 margin improvement despite tariffs .
  • Balanced growth outlook: FY2026 sales growth (1.4–2.8%) anchored in muni repair/replacement and specialty valves offsetting residential softness .
  • Capex step‑up is strategic: 4–5% of sales over three years to expand domestic capacity; near‑term margin neutrality (2026) but positions for future growth .
  • Cash strength: liquidity $595M, net debt ~$20M; FCF conversion >85% targeted, dividend increased to $0.070; ample capacity for M&A .
  • Pricing levers remain: 2026 guidance excludes potential new pricing; carryover from 2025 actions provides upside if conditions permit .
  • Operational resilience: inventory and backlog normalized; ongoing tariff/FX mitigation reduces volatility risk into FY2026 .
  • Watch catalysts: execution vs FY2026 guidance, residential trajectory, pace of capex deployment, and progress of hydrant renewal/Ecologix commercialization .