Watts Raises 2026 Sales and Margin Outlook Again

The Tip Desk · November 4, 2026 · 4 min read

Third-quarter net sales were $728 million, up 19% reported and 12% organically, as the company lifted its full-year sales and margin ranges.

Watts Water Technologies (WTS), a manufacturer of plumbing, heating and water-quality products, reported third-quarter net sales of $728 million, up 19% on a reported basis and 12% organically from the year-ago quarter, and said it is increasing its full-year 2026 sales and margin outlook.

Reported sales growth of 19% and organic growth of 12% matched the rates the company posted in the second quarter. First-quarter reported growth had been 21%.

Operating margin was 26.2%, up 800 basis points from 18.2% a year earlier. Adjusted operating margin was 20.9%, up 240 basis points. Diluted earnings were $4.34 a share, up 77%; adjusted diluted earnings were $3.40 a share, up 36%.

The company said operating-margin expansion primarily reflected $39 million of tariff refunds, classified as a special item, as well as underlying operational improvements and lower restructuring costs. Those refunds were not included in adjusted operating margin or segment margin. Adjusted operating margin rose 240 basis points on favorable price realization, sales volume leverage and productivity, partly offset by inflation and acquisition dilution.

Sales of $728 million increased 19% on a reported basis and 12% on an organic basis, due to higher volume primarily driven by data center growth and favorable price realization. Acquisition sales within the Americas and APMEA contributed $41 million, or 7%, to reported sales growth. Favorable foreign exchange contributed $1 million.

Americas sales were $553 million, up 19% on a reported basis and 12% on an organic basis, primarily due to higher volume driven by data center growth and favorable price realization. Acquisition sales contributed $35 million, or 8%, to reported sales growth. Segment margin increased 180 basis points.

Europe sales were $120 million, up 7% on a reported basis and 9% on an organic basis. Unfavorable foreign exchange reduced reported sales growth by 2%. Segment margin increased 230 basis points.

APMEA sales were $56 million, up 54% on a reported basis and 30% on an organic basis. Organic growth was primarily due to higher volume driven by data center growth as well as favorable price realization. Acquisition sales contributed $6 million, or 17%, to reported sales growth. Segment margin increased 170 basis points.

Chief Executive Officer Robert J. Pagano Jr. said demand remained particularly strong in data center applications, reinforcing the company’s confidence in the long-term potential of that market. He said higher interest rates and ongoing market uncertainty continue to weigh on new construction markets, while momentum in data center sales and strong price performance are supporting the outlook.

The company is increasing its full-year sales and organic sales growth outlook as well as its operating margin and adjusted operating margin outlook. Full-year sales growth is expected to range from up 17% to 18% on a reported basis and up 11% to 12% on an organic basis. Full-year operating margin is expected to be between 21.6% and 21.7%, or up 320 to 330 basis points, and adjusted operating margin is expected to be between 20.3% and 20.4%, or up 70 to 80 basis points. The ranges are approximate, assume no change in the level of impact from the Middle East conflict, incorporate the estimated impact of tariffs in place or announced, and adjusted results exclude the impact of tariff refunds and related interest income.

For the first nine months of 2026, operating cash flow was $279 million and net capital expenditures were $49 million, resulting in free cash flow of $230 million, versus $216 million in the comparable period last year. The company said free cash flow increased due to higher net income, including the favorable impact from tariff refunds, partly offset by higher working capital levels, increased capital expenditures, and the benefit in the prior year from lower cash tax payments. Working capital increases were due to higher accounts receivable attributable to higher net sales and higher inventory due to inflation and strategic inventory investments to support data center demand. The company said anticipated normal seasonality for the fourth quarter is expected to result in strong operating and free cash flow.

Watts repurchased approximately 11,000 shares of Class A common stock at a cost of $3.9 million during the third quarter. Approximately $117 million remains available under the stock repurchase program authorized in 2023, with no expiration date.