Watts Water (WTS) Q1 2026 Earnings Transcript

Motley Fool Transcribing, The Motley Fool

Thu, May 7, 2026 astatine 10:54 AM CDT 21 min read

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DATE

Thursday, May 7, 2026 astatine 9 a.m. ET

CALL PARTICIPANTS

• Chairman, President, and Chief Executive Officer — Robert J. Pagano

• Executive Vice President and Chief Financial Officer — Diane M. McClintock

Full Conference Call Transcript

Robert J. Pagano: Thank you, Diane, and bully morning, everyone. Please crook to Slide 3, and I volition supply an overview of the archetypal quarter. We began 2026 with better-than-expected results, including grounds sales, operating income, operating margin, and net per share. I would similar to convey the full Watts squad for their impactful contributions to our results. Organic income roseate 12% successful the quarter, arsenic we benefited from terms and incremental volume. Adjusted operating borderline of 20.1% accrued 110 ground points owed to better-than-expected price, volume, and productivity, which much than offset tariff costs, inflation, and acquisition dilution of 80 ground points. Our equilibrium expanse remains beardown and provides ample capableness to enactment our disciplined superior allocation strategy.

This includes evaluating strategical M&A opportunities portion continuing to put successful merchandise innovation and advancing our integer strategy. As a effect of our coagulated commencement to 2026 and expected currency flows for the remainder of the year, we announced a 21% summation to our dividend opening successful June. We proceed to spot beardown momentum successful information halfway cooling applications, with income much than doubling successful the 4th arsenic we deepen lawsuit relationships and leverage our wide portfolio. To enactment this maturation and conscionable our customers’ needs, we are investing successful our squad and accelerating innovation crossed our merchandise portfolio. Additionally, we are expanding capacity, including adding inventory to conscionable shorter lead-time expectations.

We are besides gaining traction with our integer solutions, including the Nexa platform, our intelligent h2o absorption solution. Together, these strategical initiatives are driving maturation and helping to offset softer extremity markets. In 2025, we completed 5 acquisitions enhancing our exertion capabilities and expanding our merchandise range, geographic reach, and vulnerability to high-growth nonresidential extremity markets. These businesses are performing well, and we are successfully integrating them done our One Watts show system. We are connected way to execute oregon transcend the targeted synergies. We are proactively moving to mitigate the interaction of the Middle East conflict.

Our nonstop income vulnerability to the Middle East is constricted to astir 2% of planetary sales, with the bulk being successful our APMEA region. We are implementing targeted pricing strategies arsenic good arsenic sourcing and productivity initiatives to mitigate some the nonstop and indirect impacts, including freight and vigor outgo increases. Our nonstop Middle East vulnerability includes our caller acquisition, Saudi Cast, and I would similar to item that the Saudi Cast concern is mostly an in‑country concern model, which should assistance insulate it from the afloat interaction of the conflict. The tariff situation besides remains fluid, with IEPA tariffs being eliminated but mostly being offset by caller tariffs nether Section 122 and changes successful the Section 232 rules.