Watts Water Technologies (WTS) Q1 2026 earnings summary

Executive summary

• Achieved record Q1 2026 results with net sales of $677.3 million, up 21% year-over-year and 12% organically, driven by strong price, volume, and data center demand.

• Operating margin rose to 19.6% (up 390 bps), with adjusted operating margin at 20.1% (up 110 bps); adjusted EPS increased 28% to $3.04, and diluted EPS rose 34% to $2.97.

• Announced a 21% dividend increase to $0.63 per share, reflecting strong balance sheet and capital allocation flexibility.

• Integration of five acquisitions in 2025 enhanced technology, product range, and geographic reach, with synergy realization progressing well.

• Maintained full-year 2026 outlook amid macroeconomic and geopolitical uncertainty, with continued focus on innovation, digital solutions, and capacity expansion.

Financial highlights

• Q1 net sales reached $677.3 million, up 21% reported and 12% organically year-over-year.

• Adjusted EBITDA was $151 million (+27%), margin 22.3% (+90 bps); adjusted operating income was $136 million (+28%), margin 20.1% (+110 bps).

• Net income rose 34.6% to $99.6 million; diluted EPS up 34% to $2.97.

• Gross profit increased to $326.1 million, though gross margin declined to 48.1% due to acquisition dilution.

• Free cash flow dropped to $6.6–$7 million from $45.6 million, primarily due to higher working capital and capital investments.

Outlook and guidance

• Full-year 2026 outlook reaffirmed: organic sales growth of 2–6%, reported sales growth of 8–12%.

• Q2 reported sales expected to rise 10–14%, organic sales up 4–8%; Americas to see mid to high single-digit growth, Europe low single-digit decline, APMEA low to mid single-digit growth.

• Operating margin forecasted at 18.8–19.4%; adjusted operating margin at 19.1–19.7%.

• Free cash flow conversion target for the year remains ≥90% of net income.

• $40–$50 million in capital expenditures planned for the remainder of 2026.