Mueller Water Raises Profit Outlook as Margins Widen
The water-infrastructure manufacturer lifted fiscal-2026 adjusted EBITDA guidance to $367 million-$372 million.
Mueller Water Products (MWA), a water-infrastructure products manufacturer, expanded its fiscal third-quarter adjusted operating margin to 24.0% as earnings growth accelerated despite softer volumes.
The quarter extended a run of margin gains while the source of sales growth shifted back toward pricing. Higher prices offset slightly lower volumes, a change from the second quarter, when both pricing and volume contributed.
Net sales rose 4.1% from a year earlier to a record $395.9 million, slowing from growth of 5.5% in the second quarter and 4.6% in the first. Adjusted diluted earnings climbed 47.1% to a record $0.50 a share, accelerating from increases of 17.6% and 16.0% in the prior two quarters.
Adjusted EBITDA increased 24.3% to a record $107.4 million, while its margin widened 440 basis points to 27.1%. Gross margin reached 39.4%, up 110 basis points from a year earlier and above 37.6% in each of the first two quarters.
Water Management Solutions led the advance, with sales rising 10.3% to $180.6 million as both volume and pricing increased. The segment's adjusted operating income jumped 50.5% to $45.6 million, and its adjusted EBITDA margin expanded 650 basis points to 28.1%. Water Flow Solutions sales slipped 0.6% to $215.3 million as lower volumes absorbed most pricing gains, while adjusted operating income rose 9.1% and adjusted EBITDA margin widened 310 basis points to 34.1%.
Selling, general and administrative expense fell 9.9% to $64.0 million, mainly due to reduced foreign-currency headwinds and lower incentive compensation. A one-time tax benefit tied to a foreign-subsidiary investment loss lowered the effective tax rate to 15.7% and added $0.06 a share to adjusted earnings. Strategic reorganization and other charges increased to $11.2 million and included transaction expenses, asset impairments, severance and leadership-transition costs.
Mueller now expects fiscal-2026 adjusted EBITDA of $367 million to $372 million, representing growth of 12.5% to 14.0%, after raising the outlook in each of the previous two quarters. Sales guidance is narrower at $1.47 billion to $1.48 billion, or growth of 2.8% to 3.5%, as slower new-residential-construction activity weighs on demand.
Nine-month operating cash flow rose to $154.2 million and free cash flow increased to $110.6 million, reversing the declines recorded through the first six months. Mueller reiterated free-cash-flow conversion above 70% of adjusted net income and repurchased $10.0 million of shares during the quarter, nearly double the first-quarter amount.