Mueller Water Products, Inc.

Third-quarter consolidated net sales increased 4.1% year over year to a record $395.9 million. Gross profit rose 6.9% to $155.8 million, and gross margin expanded 110 basis points to 39.4%. Adjusted EBITDA increased 24.3% to a record $107.4 million, with adjusted EBITDA margin up 440 basis points to 27.1%. Adjusted net income per diluted share increased 47.1% year over year to a record $0.50, and the effective tax rate was 15.7% versus 27.1% a year ago, aided by a one-time tax benefit that contributed about $0.06 per share. For the first 9 months, free cash flow was $110.6 million and represented 59% of adjusted net income. For fiscal 2026, management narrowed net sales growth guidance to 2.8%–3.5%, raised adjusted EBITDA guidance to $367 million–$372 million, lowered SG&A guidance to $241 million–$245 million, reduced tax rate guidance to 21%–23%, reaffirmed capex at $60 million–$65 million, and said free cash flow conversion should exceed 70% of adjusted net income.

Paul McAndrew said the quarter reflected strong execution under the Mueller Operating System, with record sales, EBITDA and adjusted EPS and continued progress on margins, cash generation, growth investment and simplification. He emphasized pricing discipline, operational excellence, and strategic focus, while noting the company is still navigating slower new residential construction and broader uncertainty. He also highlighted the i2O exit, saying the savings and tax benefits should support margin expansion and free cash flow.

Melissa Rasmussen emphasized that the business delivered record financial performance despite inflation, elevated Section 232 tariff costs and portfolio optimization charges tied to the i2O exit. She cited higher pricing, tariff refunds and SG&A discipline as the main drivers of the quarter, along with record segment profitability in both WFS and WMS. On the balance sheet, she said cash and cash equivalents were $495 million, total debt was $453 million, liquidity was $659 million, and there were no debt maturities until June 2029; she also noted no ABL borrowings and a 4% fixed-rate senior note. She framed the outlook as still positive but more cautious on Q4 volumes, especially in WMS, due to softer residential activity, normalized hydrant backlog, lapping tariff pricing, and no further tariff refunds expected.

Analysts focused on Q4 segment trends, the sustainability of pricing, specialty valves and data center exposure, and the durability of municipal demand as federal stimulus rolls off. Management said WFS should still be above prior year on EBITDA but likely down sequentially, while WMS should see lower margins year over year and sequentially because of lower hydrant volume, tougher residential demand and the end of tariff refunds. On pricing, management said they have historically been price/cost positive and expect mid- to low-single-digit price realization over time, though Q4 realization should be a bit lower as they lap last year’s tariff benefits. On specialty valves, they said it remains the fastest-growing category, makes up most of backlog, and is increasingly benefiting from data center and industrial water opportunities, though that business is still relatively small.