Key Highlights

  • Net sales were USD 728.0 million against USD 611.7 million last year, up 19% reported and 12% organic.
  • Adjusted diluted EPS was USD 3.40 against a USD 3.14 estimate, while GAAP diluted EPS was USD 4.34.
  • Operating margin was 26.2% including USD 39 million of Tariff refunds, and adjusted Operating Margin was 20.9%.
  • Full year 2026 reported sales growth is guided at 17% to 18%, with organic growth of 11% to 12%.

Watts Water Technologies (NYSE:WTS) raised its full year 2026 sales and margin guidance again, with chief executive Robert Pagano citing Data Center Demand and price performance. Reported sales growth is now guided at 17% to 18% and organic growth at 11% to 12%. The update accompanied third quarter net sales of USD 728.0 million and adjusted EPS of USD 3.40, against an estimate of USD 3.14.

Guidance and Outlook

Full year operating margin is guided at 21.6% to 21.7%, up 320 to 330 basis points, and adjusted operating margin at 20.3% to 20.4%, up 70 to 80 basis points. The company said the ranges are approximate, assume no change in the effect of the Middle East conflict, include the estimated impact of tariffs in place or announced, and exclude tariff refunds and related interest income from adjusted results.

The chief executive said higher interest rates and market uncertainty continue to weigh on new construction markets, while data center momentum and price performance are supporting the outlook. Management named customer-driven innovation, digital capabilities and the One Watts Performance System as the basis for long-term growth.

The Quarter in Detail

Net sales rose to USD 728.0 million from USD 611.7 million, with higher Volume tied mainly to data center growth and price realization. Acquisitions contributed USD 41 million, or 7%, to reported growth, and foreign exchange added USD 1 million. Gross Profit was USD 401.0 million against USD 298.4 million, and Operating Income was USD 190.8 million against USD 111.4 million.

Operating margin rose 800 basis points to 26.2%, which the company tied mainly to USD 39 million of tariff refunds classified as a special item, along with operational gains and lower restructuring costs of USD 0.3 million. Adjusted operating income was USD 151.8 million against USD 113.3 million, and adjusted operating margin of 20.9% compares with 18.5%. Net Income was USD 145.4 million against USD 82.2 million. Diluted EPS was USD 4.34, including special items of USD 0.94 per share, against USD 2.45.

Regional Segments

Americas sales were USD 553 million, up 19% reported and 12% organic, with Acquisition sales of USD 35 million and segment margin up 180 basis points. Europe sales were USD 120 million, up 7% reported and 9% organic, with foreign exchange reducing reported growth by 2% and segment margin up 230 basis points.

APMEA sales were USD 56 million, up 54% reported and 30% organic, driven by data center volume and price, with acquisitions adding USD 6 million and foreign exchange 8%. Segment margin rose 170 basis points.

Balance Sheet and Cash Markers

Cash of USD 444.8 million sits alongside long-term Debt of USD 98.2 million, nine-month free Cash Flow of USD 230 million and about USD 117 million remaining under the 2023 repurchase authorization.

Nine-month Operating Cash Flow was USD 279 million against USD 247 million, with net capital expenditures of USD 49 million. The company attributed the free cash flow change to higher net income, including tariff refunds, partly offset by higher Working Capital for receivables and inventory tied to data center demand. Cash was USD 405.5 million and long-term debt USD 197.7 million at year end 2025.

The quarterly Dividend declared was USD 0.63 per share against USD 0.52, and the company repurchased about 11,000 shares for USD 3.9 million in the quarter. Management pointed to normal fourth quarter seasonality for operating and free cash flow, and a conference call was scheduled for November 5, 2026.