Watts Water Technologies (WTS) Q4 2025 earnings summary

Executive summary

• Achieved record sales, operating income, and EPS for both Q4 and full year 2025, driven by strong execution, innovation, and five strategic acquisitions that diversified the business and expanded market reach.

• Maintained a resilient and diversified business model with robust cash flow and a strong balance sheet, enabling continued capital allocation flexibility.

• Focused on higher-margin, faster-growing segments, especially data centers and institutional markets, leveraging a large installed base for repair and replacement activity.

Financial highlights

• Q4 2025 sales reached $625 million, up 16% reported and 8% organic; full year sales were $2.44 billion, up 8% reported and 5% organic.

• Q4 adjusted operating margin was 19.0% (+220 bps); full year adjusted operating margin was 19.6% (+190 bps).

• Q4 adjusted EPS was $2.62, up 28%; full year adjusted EPS was $10.58, up 19%.

• Free cash flow for 2025 was $356 million, up 7% year-over-year, with a conversion rate of 105%.

• Returned $83 million to shareholders via dividends and share repurchases.

Outlook and guidance

• 2026 reported sales growth expected at 8%-12%, organic growth at 2%-6%; Q1 2026 reported sales up 12%-16%, organic up 4%-8%.

• Adjusted operating margin for FY 2026 guided at 19.1%-19.7%; Q1 at 18.6%-19.2%.

• Free cash flow conversion expected at or above 90% of net income.

• Acquisition-related margin dilution anticipated (~50 bps for FY, ~70 bps for Q1).

• Excluding product rationalization, organic growth would be about 2 points higher.