WTS

Watts Water’s second quarter saw a positive market response, attributed by management to robust growth in data center cooling applications, favorable pricing, and targeted product rationalization. CEO Robert Pagano highlighted that sales were lifted by strong demand for data center solutions, including the recently launched Cool Vault thermal storage tanks. The company also benefited from strategic acquisitions and price increases, helping offset ongoing softness in residential and nonresidential new construction markets. Management noted that operational discipline and supply chain management, particularly in response to Middle East conflict and tariffs, were key contributors to the quarter's results. Is now the time to buy WTS? Find out in our full research report (it’s free). Revenue: $763.2 million vs analyst estimates of $727.3 million (18.6% year-on-year growth, 4.9% beat) Adjusted EPS: $3.66 vs analyst estimates of $3.34 (9.7% beat) Operating Margin: 20.2%, in line with the same quarter last year Organic Revenue rose 12% year on year (beat) Market Capitalization: $12.84 billion While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention. Andrew Krill (Deutsche Bank) asked about the expansion of the total addressable market (TAM) for data center cooling solutions. CEO Robert Pagano explained that the TAM doubled to $2 billion by including Europe and new global opportunities, and highlighted the shift toward liquid cooling and the addition of thermal storage tanks. William Grippin (Barclays) pressed for detail on new data center product adoption and future pipeline. Pagano said the Cool Vault launch was a major driver, and ongoing R&D is focused on stainless steel and liquid cooling products, with further new launches expected soon. Michael Halloran (R.W. Baird) questioned the outlook for legacy construction markets and pricing trends. Pagano noted continued softness in residential and nonresidential segments, with single-family construction worsening, while McClintock said recent price actions should keep margins steady despite inflation. Jeffrey Hammond (KeyBanc Capital Markets) asked about the content opportunity per megawatt in data center projects and Watts’ market outgrowth. Pagano clarified that content per megawatt is higher with liquid cooling, and the company is outgrowing the market by focusing on profitable, high-content opportunities. Jae Hyun Ko (Jefferies) inquired about project visibility and go-to-market strategy for data centers. Pagano explained that visibility ranges up to five months for large projects, with sales involving a mix of direct relationships with hyperscalers, OEMs, and distribution partners. In the coming quarters, our analysts will be watching (1) the pace and sustainability of data center sales growth, especially as project timing remains variable; (2) the company’s ability to manage margin headwinds from tariffs and inflation; and (3) integration progress and synergy realization from recent acquisitions. We will also monitor any changes in the repair and replacement segment’s stability and the impact of new product launches in high-growth sectors. Watts Water Technologies currently trades at $384.55, up from $363.84 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members). WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses. But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE. Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.

Image source: The Motley Fool. Thursday, Aug. 6, 2026 at 9:00 a.m. ET Chief Executive Officer - Robert Pagano Vice President, Investor Relations - Ray Nash Operator: Welcome to Watts Water Technologies, Inc. Second Quarter 2026 Earnings Call. [Operator Instructions] I will now turn the call over to Ray Nash, Vice President, Investor Relations. Ray Nash: Thank you, and good morning, everyone. Welcome to our second quarter earnings conference call. Before we begin, I'd like to remind everyone that during this call, we may be making certain comments that constitute forward-looking statements. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially. For information concerning these risks, see Watts' publicly available filings with the SEC. The company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Today's webcast is accompanied by a presentation, which can be found in the Investor Relations section of our website. We will reference this presentation throughout our prepared remarks. Any reference to non-GAAP financial information is reconciled in the appendix to the presentation. With that, I will turn the call over to Bob. Robert Pagano: Thank you, Ray, and welcome to your first earnings call with Watts. Good morning, everyone. Please turn to Slide 3, and I'll provide an overview of the second quarter. We delivered another quarter of better-than-expected results, including record sales, operating income and earnings per share. I'd like to thank the entire Watts team for their dedication and contributions which made these results possible. Organic sales rose 12% in the quarter as we benefited from strong growth in data centers and favorable price as well as pull-forward demand, partly offset by our 80/20 rationalization program. Adjusted operating margin was 21%, down 60 basis points, primarily reflecting the anticipated dilution from recent acquisitions and a difficult comparison against a onetime price/cost benefit in the prior year that we discussed last quarter. Even with those headwinds, margin performance was better than expected due to favorable price, volume leverage and productivity. Our balance sheet remains strong and provides ample capacity to support our disciplined capital allocation strategy. This includes evaluating strategic M&A opportunities while continuing to invest in productivity, product innovation and other key growth initiatives. Moving on to our business updates. We continue to make good progress, integrating our recent acquisitions using the One Watts performance system. As a reminder, we completed 5 acquisitions in 2025 to expand our portfolio, strengthen our market reach and increase exposure to nonresidential markets. Overall, these businesses are performing well, and we remain on track to achieve or exceed our targeted synergies. We have also continued to proactively manage the impact of the Middle East conflict on our business. While it created some headwinds during the quarter, our teams have responded with pricing, supply chain and productivity initiatives to help mitigate both the direct and indirect impacts. We're also pleased with the resilience of our newly acquired Saudi Cast business as its in-country, for-country business model has limited the impact from the disruptions in the region. The tariff environment also remains fluid with new Section 301 and 338 tariffs recently announced. These are in addition to the Section 232 currently in effect and replace the Section 122 tariffs, which recently expired. Based on the tariff structures currently in place, we continue to believe we're well positioned from a price/cost standpoint. Watts offers one of the industry's broadest portfolios of water solutions. And as we discussed before, approximately 60% of our sales come from repair and replacement activity. Together, these characteristics give us a strong foundation across different economic environments. As a result, while residential and noninstitutional new construction markets remain challenged, we have continued to execute well and have been able to allocate resources towards high-growth market opportunities, including our data center initiative. We continue to see accelerated demand in data center cooling applications. And while data centers remain a relatively small part of our overall business today, we're encouraged by the momentum we're seeing. I'll provide more of an update on our data center initiatives in a few moments. We published our 2025 sustainability report in June. Our sustainability efforts continue to create value for both our customers and Watts. We've made meaningful progress against our second generation of environmental goals while expanding innovative solutions that improve safety, water conservation and energy efficiency. These efforts reinforce our commitment to solving our customers' most critical water challenges while supporting long-term growth. I'm proud of the progress our global teams have made and invite you to read more about it in the appendix of today's presentation or in our sustainability report, which can be found on our Investor Relations website. Now an update on our outlook for the remainder of the year. Due to our strong first half and our expectations for the third quarter, we are increasing our full year sales and margin outlook. Data center growth, price realization and performance in Europe and APMEA are all better than expected versus the outlook we provided in May. However, we do continue to see weakness in some of our macro indicators. Inflation measures and commodity prices are persistently higher compared to earlier this year. In addition, the market outlook for interest rates has shifted with expectations of no further rate reductions throughout the rest of the year. These factors are compounded by continued uncertainty around trade policies and geopolitical disruptions, especially the ongoing Middle East conflict. As a result, we continue to expect softness in residential and noninstitutional new construction market. Next, please turn to Slide 4 for an update on our data center growth initiative. In the second quarter, our data center sales more than tripled compared with the prior year, reflecting continued strong demand for our cooling solutions, including our recently launched Cool Vault thermal storage tanks. Through the first 6 months of 2026, our data center sales represented 8% of total sales, including some of the pull forwards I mentioned earlier, which Diane will discuss in more detail. We estimate our served addressable market is approximately $2 billion. This is based on our view of the global market opportunity, including regions beyond China and North America, the double-digit growth rate of the market and also the trend towards more liquid cooling solutions. As liquid cooling adoption continues to increase, we're also seeing greater content opportunities per megawatt than the traditional air-cooled systems. Because this is a project-based business, the timing and volume of sales will be more variable than in some of our other markets. This can have an impact on our quarterly outlook as we saw with customer-driven pull forward in Q2. Our expanding global data center organization, along with investments in new product launches, have been paying off. And we feel confident in our ability to scale with our customers. We now expect data center sales for the full year to represent mid- to high single digits as a percentage of overall company sales compared with just 3% of sales last year. We've been growing faster than the market based on our ability to serve our customers and deliver quality products while continuing to develop strong relationships with contractors, OEMs and hyperscalers. Data centers continue to represent one of our most attractive growth opportunities. With that, let me turn the call over to Diane, who will address our second quarter results and our third quarter and full year outlook. Diane? Diane McClintock: Thank you, Bob, and good morning, everyone. Please turn to Slide 5, which highlights our second quarter results. Sales increased to $763 million, reflecting a 19% increase on a reported basis and a 12% increase organically, both better than expected. Growth was driven by price and volume, including the benefit of growth in data center sales and pull-forward sales from the third quarter, which more than offset the impact of our 80/20 rationalization initiative. The Americas region delivered strong organic growth of 12% and reported growth of 17%, both better than expected, driven mainly by price and volume, largely from data center sales. The region also saw some pull-forward demand from wholesale customers of approximately $10 million ahead of our SAP implementation at the end of June at our largest site as well as approximately $5 million of pull forward of data center project sales, which shipped earlier than planned. Our 80/20 product rationalization initiative resulted in a reduction of sales of approximately $8 million or a 1% impact on organic growth. Acquisitions accounted for $28 million in sales, contributing 6 points to the Americas reported growth. In Europe, organic sales rose 9%, while reported sales increased 12%. Organic growth stemmed from favorable pricing and higher volumes, particularly in our HVAC business, while reported sales also benefited from positive foreign exchange. Our 80/20 product rationalization resulted in a decline of sales of roughly $1 million or a 1 point impact on organic growth. In APMEA, organic sales grew 31% and driven by an increase in data center sales in China, partly resulting from approximately $5 million of pull forward of several data center projects, which shipped early due to customer requirements, which more than offset the headwinds from the Middle East conflict. Acquisitions added 17% and favorable foreign exchange contributed 9% for total reported sales growth of 57%. Adjusted EBITDA totaled $177 million, an increase of 15% with an adjusted EBITDA margin of 23.1%, down 70 basis points year-over-year. Adjusted operating income of $160 million, increased 15%. And adjusted operating margin decreased 60 basis points to 21%. The margin declines were primarily driven by the expected acquisition dilution of 70 basis points, the difficult comparison to the prior year tariff-related price/cost benefit and inflation. This decline was partially offset by favorable price, volume leverage and productivity gains. Segment margins were as follows. Americas decreased 150 basis points to 25.7%, while Europe increased 160 basis points to 13.3% and APMEA increased 100 basis points to 19.9%. Adjusted earnings per share were $3.66, representing 18% year-over-year growth with operational performance, acquisitions, tax and foreign exchange driving the majority of the increase. The adjusted effective tax rate in the quarter was 23.1%, favorable by 210 basis points compared to the second quarter of 2025, primarily due to a nonrecurring tax benefit from the reversal of a prior year tax liability. Our free cash flow year-to-date was $98 million compared to $105 million in the same period last year. The cash flow decrease was primarily due to an increase in accounts receivable due to higher sales and our strategic investment in inventory. We expect seasonal sequential improvement in the second half of the year and are on track to achieve our full year goal of free cash flow conversion greater than or equal to 90% of net income, as previously communicated. The balance sheet remains strong and provides us with good flexibility to execute on our capital allocation priorities. Our net debt to capitalization ratio at quarter end was negative 12%, and our net leverage is negative 0.4x. On Slide 6, we'll review our outlook for the third quarter and full year 2026. As Bob mentioned, we are raising our full year sales and margin outlook. This is based on a strong first half and our third quarter outlook. This updated guidance assumes there is no change in the current status of the Middle East conflict. We are also assuming that there are no further changes to the tariff structure that is currently in place. And we are also not including any potential IEPA tariff refunds in our outlook. And any refunds received in future periods will be treated as nonrecurring special items and will, therefore, not be included in our adjusted results. We now anticipate organic sales growth of 8% to 11%, which reflects over a 5-point increase to the midpoint of our previous outlook. Excluding the impact of our ongoing 80/20 product rationalization, our organic sales growth would be approximately 1 point higher. Our reported sales are now expected to be up 14% to 17%. Regionally, organic sales in the Americas are now expected to increase by 9% to 12%, and driven by price and volume, especially within data centers, more than offsetting anticipated 80/20 product rationalization headwinds of $25 million to $26 million. In Europe, organic sales are now projected to increase by 1 point to 4 points as favorable price and volume are partly offset by $6 million to $8 million in 80/20 product rationalization. APMEA is now expected to achieve organic growth between 9% and 12%. Incremental sales from acquisitions are expected to be between $105 million and $110 million in the Americas, a slight decline from our previous outlook as we begin to drive 80/20 actions in these businesses. We also expect between $21 million and $22 million of acquired sales in APMEA. Foreign exchange is estimated to be an $18 million favorable impact. We are raising our full year adjusted EBITDA margin outlook to a range of up 20 to up 80 basis points, which is a 60 basis point increase in the midpoint of our previous outlook. We are also raising our full year adjusted operating margin expansion to a range of up 20 to up 80 basis points, which is 70 basis points higher than the midpoint of our previous outlook. Margin expansion continues to come from price, volume leverage and productivity, which more than offset higher inflation and 50 basis points of acquisition dilution. Regionally, Americas segment margin is now anticipated to range from a decrease of 20 basis points to an increase of 40 basis points, largely overcoming approximately 100 basis points of acquisition dilution. Europe segment margin is now expected to increase 20 to 80 basis points based on strong price and productivity, which includes the expected benefits from our France restructuring program. APMEA segment margin is forecasted to increase by 30 to 90 basis points. This guidance assumes no changes to the current tariff environment. Our free cash flow expectation remains in line with our previous outlook, and we expect to deliver free cash flow conversion of greater than or equal to 90% of net income. Next, a few items to consider for the third quarter. Reported sales are expected to increase by 11% to 14% with organic sales up 5% to 8%. We anticipate high single-digit to low double-digit growth in the Americas, which is sequentially lower than the second quarter due to the pull-forward demand previously discussed and the sequential decline in price as we comp prior year price increases. We expect flat to low single-digit growth in Europe and mid- to high single-digit growth in APMEA with our expected data center sales offsetting the impact of the Middle East conflict. These estimates incorporate the negative impact from product rationalization under our 80/20 initiative of approximately $2 million in Europe and $6 million in the Americas. Incremental sales from acquisitions are projected at $30 million to $33 million for the Americas and around $5 million to $6 million for APMEA. We also estimate an unfavorable foreign exchange impact of approximately $3 million. Third quarter EBITDA margin is expected to be between 22.2% and 22.8%. Operating margin is expected to be between 19.8% and 20.4%. Across all regions, price and volume leverage are anticipated to be partly offset by higher inflation and acquisition dilution of approximately 50 basis points. Additional key assumptions for the third quarter and full year are available in the appendix of the earnings presentation. With that, I'll turn the call back over to Bob before moving to Q&A. Bob? Robert Pagano: Thanks, Diane. To wrap up, we delivered another strong quarter with record sales, operating income and EPS. As we discussed throughout the call, data centers are an important growth opportunity and also a good example of how we are successfully targeting additional growth markets. At the same time, our diverse market exposure and significant repair and replacement business continue to provide a consistent foundation for revenue and cash flow generation across different economic conditions. Based on our strong first half performance and third quarter expectations, we are increasing our full year sales and margin outlook. We are monitoring the macro environment, including tariffs, interest rates and geopolitical development and we believe we are well positioned to navigate those uncertainties. Our balance sheet is strong and our cash flow is healthy, and we have ample flexibility to support our disciplined capital allocation priorities. We'll continue to deploy capital to high-return opportunities that will help us deliver sustainable profitable growth and create value for our shareholders. With that, operator, please open the lines for questions. Operator: [Operator Instructions] Our first question comes from the line of Andrew Krill with Deutsche Bank. Andrew Krill: I want to -- first on data centers. Could you just give us some more color on why the TAM expanded or doubled from $1 billion you were saying pretty recently to $2 billion so quickly? Does this include the opportunity in Europe? Or would that be incremental to the $2 billion? And on Europe, have you made any data center sales there? Or is that in the forward look? Robert Pagano: Yes. So we've been fine-tuning that analysis really where we increased it from $1 billion to $2 billion. And yes, we added Europe inside of that, and we have been selling some small -- some business inside of Europe. But look at -- in my prepared remarks, I talked about some of the shift towards liquid cooling, some of the growth we're seeing and then adding our thermal storage tank with our Cool Vault. So again, refining it more of a global number now versus just APMEA and North America number. Andrew Krill: That's helpful. And then related topic for the data centers, like can you give us some color on how hard that you're running your manufacturing sites? I noticed the CapEx in the guide moved modestly higher. Is it fair that's all related to data centers? And are we ever going to get to a point where there needs to be a more major footprint expansion? Robert Pagano: Yes. So you're correct. We did expand our CapEx, and that is directly related to some of the additions we're doing at both our sites in North America as well as inside of China as well as we're growing our global supply chain. So the teams are really focused on that, and we're adding shifts where we need to. But as we look and look for the future here, we'll adjust our CapEx accordingly. But we're not seeing huge CapEx, and we're really focused on our existing facilities and some of our new acquisitions. Superior Boiler, for example, is making some of those cool tanks. So we're adjusting their capabilities inside their factories to allow them to continue to expand and leverage their capacity that they have. Operator: Our next question comes from the line of William Grippin with Barclays. William Grippin: I guess just to start here on data centers, maybe not surprisingly, but it feels like growth has been much stronger even than maybe your own internal expectations. Just curious if you could provide a little more color here on like where you're seeing the most success? How has adoption been of new products as you roll those out? And could you give us a flavor of sort of what maybe products are in development, what could be next? And how could that continue to drive growth in this customer segment? Robert Pagano: Yes. So yes, look, in this business, customers rely on quality products delivered on time, and our teams are doing exactly that. And it's all about profitable growth in this market. So we're very selective to make sure we can meet the customer requirements. And certainly, our focus on the new Cool Vault that we talked about earlier, we did not have that product last year. And we do have it now, and that's been growing with the thermal storage tank. So we'll continue to expand. We're developing new products, especially in the stainless steel side, really as things move to more towards liquid cooling is where we're focused some of our R&D efforts. But we're working closely with our customers and looking forward to sharing more as some of these new products come online. William Grippin: Appreciate that. And then I think the guidance encompasses mid- to high single-digit revenue mix for data centers. What sort of puts and takes, I guess, or how are you thinking about what would drive you to the low end versus the high end of that range? And what is your visibility into the second half? I know you talked about this being a project-based business, so maybe it's some of that, but would just be curious there for some more color. Robert Pagano: Yes. This is a really lumpy business. It -- project, as Diane talked earlier about it, we had customers move different projects around and they accelerated some of our products and delayed some other projects that we were on. So it is lumpy. We have clear visibility on construction schedules for Q3. It gets a little tougher in Q4 because some of these delays could push some of the projects out or in. So again, we monitor that very closely. We have our project management teams working very closely with customers to stay on top of that and continuing to work and leverage that. But again, these are large projects. So it gets lumpy in some of these quarters. And we -- all things came together in the second quarter, quite honestly. And we shipped a lot. But we'll monitor that. And our best visibility is in Q3 right now, but we feel comfortable with our guidance. Operator: Our next question comes from the line of Mike Halloran with R.W. Baird. Michael Halloran: So maybe just the state of the union at what you're seeing on the more legacy construction markets, non-data center, which is obviously exciting for you guys. But any signs of change either way in the quarter? I know the environment cumulatively remains challenging. But if you think about the subsegments that you serve within the nonres landscape or multifamily, are you seeing any real change either way in any of those subareas? Robert Pagano: Mike, not -- when I look at the residential side, single family is probably getting slightly worse than it was last quarter. Multifamily is hanging in there, still soft compared to what we've seen before. Institution, both health care and education is holding up, which is good. The other -- other than data centers, the other nonresidential product, new construction is still soft. So it varies by region. But I would say, in general, it's similar to what we talked about last quarter, maybe slightly worse in the residential side. Michael Halloran: And then when you think about the pricing side of things, kind of a twofold question here. Do you think the pricing actions you've taken position you for favorability or at least neutrality as you work through the back half of the year? And maybe help just understand how that cadence is, the price/cost piece cadence is in the guidance in the back half of the year. Diane McClintock: Yes, Mike, we saw about 6% price in the second quarter. We do expect that to sequentially decline in the back half. We feel okay about our price/cost dynamic right now. We did do a couple of selected price increases globally just to address some of the inflation from the Middle East conflict and we're watching that closely. But we feel pretty good about where we're at. Operator: Next question comes from the line of Jeff Hammond with KeyBanc Capital Markets. Jeffrey Hammond: So Bob, I'd call doubling your TAM more than fine-tuning. Robert Pagano: Well, Jeff, I always said greater than $1 billion. So certainly, $2 billion is greater than $1 billion. Jeffrey Hammond: Can we just unpack that a little bit? Like how much is the Europe TAM expansion? How much do you have a TAM for this thermal tank piece? And then as you look at your product portfolio, and I think you mentioned some of the work you're doing in liquid cooling, like other products or applications that you are finding you can sell into that market would be helpful. Robert Pagano: Yes. So it's -- there's a lot of puts and takes here. But it's not only Europe. We looked at the Middle East. We also looked at Southeast Asia and some of the other markets. So before the number was primarily, let's call it, North America and China related, we've now expanded it global. We're seeing opportunities that we're quoting on a global basis. So that's the big shift. And certainly, we had a little more weighted towards air cooled, and we're seeing more of a shift towards the liquid cooled. So a bunch of math, but it gets us closer there. We -- when we said $1 billion before, we were around $1.4 billion, but we rounded it to $1 billion. Now we're leaning more up towards that $2 billion. So again, we believe it's a good number. We cross-referenced it, tied it globally and feel better about that overall number. Jeffrey Hammond: Okay. I think the thermal tank TAM and then other products that you can pull in, I want to say, you've mentioned Easywater in the past, a newer acquisition. Robert Pagano: Yes. The thermal tanks is a part of that, especially in the liquid cooling side of that. Each customer is different in how they're using thermal storage tanks, and we are leveraging our Superior Boiler because they had the ability to make large custom boilers and they have the capacity to do these very large tanks as well as what we can do in our Texas location. So again, those are opportunities. We've seen some really strong success, especially in Q2 and winning some projects that we have visibility through the rest of this year on that market. Jeffrey Hammond: Okay. And then last one, just you mentioned the market 15% to 20% growth, which seems a little bit low. But maybe just talk about your outgrowth. I mean it seems like you're crushing market growth in the near term, but just how much do you think -- what do you think your data center business can grow at versus that 15% to 20%? Robert Pagano: Yes. So prior to this, I go back to that Cool Vault and those thermal storage tanks. We're shipping a lot more of that than we had last year. We didn't ship any last year, quite honestly. So as we're looking at that, we are outgrowing the market from that point of view because of our new product development. And as I said earlier, we're focused on profitable growth. There's more activity you can get, but we're driving profitable growth. We're being disciplined and making sure we can meet the customer demand. So although the market might be growing, we're going to focus on the more profitable side of that market where the people and our customers trust our quality and on-time delivery and value that. So again, that's where we're focused and why we believe that number is the right number for us to look at. Operator: Our next question comes from the line of Brian Lee with Goldman Sachs. Keshav Choudhary: This is Keshav Choudhary on for Brian Lee. Earlier this year, you had mentioned that Asia Pacific used to be the leader for your data center business. And then America has accounted for more than half of the revenue. With the high growth highlighted in the Q2 for China data center demand, can you update us on the geographic mix and how you expect it to evolve over the next 12 months to maybe 24 months? And more importantly, are there any meaningful differences in the margin profile between U.S. and China and maybe other markets? And could a shift towards China be a tailwind or a headwind to the margins? Robert Pagano: So I'll take the first part of the question. We continue to grow specifically in the China market, but we're expanding beyond that. We've had some really strong growth in Asia Pacific, at least from the inquiries point of view other than China. As we look in Americas, is growing faster than China right now, primarily because of that Cool Vault, which we're really only having in the U.S. at this point in time. So that's where the U.S. is growing even faster than that region. But again, we're continuing to grow in all of our regions around the world, including Europe. So it's a global initiative where we're focused on leveraging our global capabilities to win in that market. Diane McClintock: And I think on your margin question, Bob is right, I think the Americas is growing faster than the Asia Pacific region. But from a margin perspective, all of it's accretive. I don't think we're going to see a mix issue going forward. Keshav Choudhary: Okay. Cool. And just to maybe continue on the data center part. You disclosed a content opportunity of about 25,000 to 100,000 per megawatt content. Can you just help us identify what will drive a project towards the high end versus the low end of that range? And whether the average content per megawatt opportunity is increasing over time? And additionally, is the content higher in the U.S. region versus the other regions? Robert Pagano: So going back to your previous question, yes, there's more content inside the U.S. only because we're selling that Cool Vault. But overall, when we look at it, each project varies depending on what part of the project and where we're getting. So it could -- a project could be as low as $50,000 or as high as $30 million. So again, it varies based on content, based on customer need and based on -- it's going to be higher in a liquid cooling application because we're selling -- there's more content inside of that. So that drives you towards the higher liquid cooling with a tank would drive you to that higher one versus smaller content on the bottom of that. So again, it varies by project. We're giving a range and the ranges adjust accordingly based on each one of the customer and based on project timing or where customers need us the most. So it's a big range. But again, that's what we're seeing in the market. Operator: Next question comes from the line of James Ko with Jefferies. Jae Hyun Ko: Congrats on the quarter. I wanted to touch on the data center again. Sorry for getting on this. But like on project visibility, I think other like companies kind of serving the data center construction kind of supply chain kind of described it as kind of multiyear backlog and they have all the design win pipelines and everything. So does Watts have similar visibility into its data center pipeline longer term? Or is the nature of our products such that orders are placed closer to the construction date with kind of less lead time? Yes, any color on that would be helpful. Robert Pagano: Yes. So I think the answer is both, right? We have longer visibility in particular with the Cool Vault because they're very large and take a long time to do it. But some of the other products, we have lower visibility. So we don't have 2 years' worth of visibility. I would say at the largest amount, we have maybe 5 months, and then it is down from there. But we stay very close to customers. We understand where their plans are construction, contractors, et cetera, on what their needs are, and we're anticipating their future needs based on discussions with them, and we have a great pipeline. We're working with them. It's also a timing of the release. A lot of them change their designs and won't finalize the design until very close to the end, which impacts the piping and the valve structure inside that business. So it's based on size, et cetera, as it gets closer. So that's -- we've been combating that by having inventory available on the various sizes and adjust accordingly. So as you can see, we've been investing in inventory to have that variability inside each one of those customer requirements. Jae Hyun Ko: Got it. And I guess, kind of like a similar question. Can you kind of walk us through how you actually kind of go to market on this data center cooling loop? Are you like selling primarily to distribution, like direct to mechanical contractors or directly to hyperscalers and OEMs that are doing actual system? And like at what stage, product design process does Watts typically gets specified in? Do they usually sole source? Or do they usually use multiple sourcing? Robert Pagano: Well, I think in this market, I think that all of them are multiple sourcing based on projects and where they're doing it. We involved a lot of with our rep network. We're working closer with the customers. So there -- we're partnering with our reps and the contractors working directly with them. And in some cases, especially on the Cool Vault, it's more -- we're really working with the -- some of the hyperscalers and the contractors directly with that. So each one of it varies. We've been -- you get qualified by the hyperscalers and working directly with all the channel partners to do it. So we're in the whole process. We see the pipelines. We see the jobs. We're speaking with them and we stay very close with them until the final release is out there. Operator: [Operator Instructions] Our next question comes from the line of Jeffrey Reive, which has happened to disconnect his line. Okay, everyone, that concludes the question-and-answer session. I would like to turn the call back over to Ray Nash for closing remarks. Robert Pagano: Operator, it looks like he came back in to the queue. Operator: Okay. Jeffrey Reive, your line is open. Jeffrey Reive: Yes. Sorry about that. The long pause. Maybe a question, if I was logged in for a question. So I just want to go back to some of the data center stuff. I'm sorry for kind of going so much of this discussion, but the $25,000 to $100,000 per megawatt, I think, is a new disclosure. Can you just help us understand where within the range your current mix sits and maybe what your pipeline looks like? And should we just think about the $100,000 as like a data center with both air and liquid cooling? Or is there something else? Robert Pagano: Yes. We talked a little bit about this in the previous questions. But again, I would say the high end would assume it's a liquid cooled that also has thermal storage tanks. So that's on the high end and very high end. I would say the answer is always in between. Some of those numbers, I see that's kind of where we're seeing a lot of these. But again, every project is different, every -- these are just general discussions. We've had a lot of inquiries over the past quarter. People asking us, could you quantify this for us? So we did our best job of doing it. Anytime you give a range like this, it gets very difficult because it can be on the small end. It depends on whether liquid cooled, air cooled, whether it's in the U.S., whether it's in China or wherever in Europe. So again, we participate throughout the whole cycle. We're just trying to give you the ranges for each one of these to give you some clarity when you look at inside of an overall data center and how we play. Jeffrey Reive: Appreciate that. I guess, directionally, we can then make an assumption kind of where liquid cooling growth is and kind of your opportunity. And then maybe just one more on just the gross margin compressed this quarter. I think SG&A improved. Is that related to the data center business mix? Should we expect that to continue? And maybe is there a natural floor in gross margins as the portfolio shifts? Diane McClintock: Yes. From the gross margin perspective, remember, there's a little bit of acquisition dilution in there. we did have that -- the challenging price/cost compared to last year. So those are a couple of pieces of it. And yes, on the data centers, we do have a little bit of gross margin dilution from that, but it's actually accretive to operating margin because there's a very low operating expense burden on that data center business. So you will see that a little bit going forward. Operator: There are no further questions at this time. I would like to turn the call back over to Ray Nash for closing remarks. Ray Nash: Thank you, operator. Thank you for joining us today. We appreciate your continued interest in Watts and look forward to speaking with you again during our third quarter earnings call in early November. Have a great day, and stay safe. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect. Before you buy stock in Watts Water Technologies, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Watts Water Technologies wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $403,337!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,334,946!* That performance is why people listen. With a track record of beating the S&P 500 by 4x, Stock Advisor offers a distinct advantage. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built for the long haul. See the 10 stocks » *Stock Advisor returns as of August 12, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Watts Water Technologies (WTS) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Interested in Watts Water Technologies, Inc.? Here are five stocks we like better. Record Q2 performance: Sales rose 19% to $763 million, while adjusted EPS increased 18% to $3.66. Growth was driven by pricing, acquisitions and strong data-center demand, although adjusted operating margin fell 60 basis points to 21%. Data centers are a rapidly expanding opportunity: Sales to data-center customers more than tripled year over year, and Watts raised its estimated served market to approximately $2 billion, including liquid-cooling and thermal-storage applications. Management cautioned that project timing and customer pull-forwards could increase quarterly volatility. Full-year outlook raised despite construction weakness: Watts now expects 8%–11% organic sales growth, 14%–17% reported growth and 20–80 basis points of adjusted margin expansion. Residential and broader nonresidential construction remain soft, but repair-and-replacement activity, which represents about 60% of sales, provides support. ABB’s Rotork Deal Could Put These Flow Control Stocks Back in Focus Watts Water Technologies (NYSE:WTS) reported record second-quarter sales, operating income and earnings per share, driven by pricing, data center demand and contributions from recent acquisitions. The company raised its full-year sales and margin outlook, though executives said residential and non-institutional construction markets remain under pressure. Second-quarter sales increased 19% on a reported basis to $763 million and rose 12% organically. Adjusted operating income increased 15% to $160 million, while adjusted operating margin declined 60 basis points to 21%. Adjusted earnings per share rose 18% year over year to $3.66. → No Hangover: Revisiting Microsoft One Week After Earnings “We delivered another quarter of better-than-expected results, including record sales, operating income and earnings per share,” Chief Executive Officer Robert Pagano Jr. said. He attributed organic growth to data center demand and favorable pricing, partly offset by the company’s 80:20 product rationalization program. Data centers continued to be a major source of growth for Watts during the quarter. Pagano said data center sales more than tripled from the prior-year period, supported by demand for cooling products, including the company’s recently launched CoolVault thermal storage tanks. → MarketBeat Week in Review – 08/03 - 08/07 For the first six months of 2026, data center sales represented 8% of total company sales, including some customer-driven sales that were pulled forward from later periods. Watts now expects data center revenue to account for a mid- to high-single-digit percentage of full-year sales, compared with 3% in the prior year. The company increased its estimate of its served addressable market for data center products to approximately $2 billion, from a prior estimate of more than $1 billion. Pagano said the revised estimate incorporates a broader global opportunity, including Europe, the Middle East and Southeast Asia, as well as growing adoption of liquid-cooling systems. → Why the Landlord of the AI Boom Could Outlast the Chipmakers Watts said liquid cooling can increase its content opportunity per megawatt compared with traditional air-cooled systems. Pagano said the company’s content opportunity varies considerably by project, ranging from about $25,000 to $100,000 per megawatt. Liquid-cooled projects that include thermal storage tanks generally represent the higher end of that range. While the company sees strong demand, management cautioned that data center projects can make quarterly results more variable. Customer requirements pulled roughly $5 million of data center project sales into the second quarter in the Americas and another approximately $5 million in APMEA, the Asia-Pacific, Middle East and Africa region. Pagano said Watts has its greatest visibility into third-quarter construction schedules, while fourth-quarter timing is less certain because customers can shift project schedules or finalize designs closer to installation. The company said it is investing in inventory and capacity to respond to customer needs. The Americas segment posted 17% reported sales growth and 12% organic sales growth, largely reflecting pricing and volume tied to data center activity. Wholesale customers also pulled forward approximately $10 million in demand ahead of an SAP implementation at Watts’ largest site at the end of June. Acquisitions contributed $28 million in Americas revenue, while the company’s product rationalization initiative reduced segment sales by approximately $8 million. Americas segment margin declined 150 basis points to 25.7%. Europe reported sales growth of 12% and organic growth of 9%, supported by pricing and higher HVAC volumes. Foreign exchange also benefited reported growth. Europe’s segment margin increased 160 basis points to 13.3%. APMEA delivered 57% reported sales growth and 31% organic growth. The company cited increased data center sales in China, including the pull-forward projects, as well as acquisition and foreign-exchange benefits. The Middle East conflict created headwinds, but the company said its recently acquired Saudi Cast operation has been relatively resilient because of its in-country business model. APMEA segment margin increased 100 basis points to 19.9%. Adjusted EBITDA rose 15% to $177 million, while adjusted EBITDA margin declined 70 basis points to 23.1%. Chief Financial Officer Diane McClintock said the margin decline primarily reflected 70 basis points of expected dilution from acquisitions, inflation and a difficult comparison against a prior-year tariff-related price-cost benefit. Those factors were partly offset by favorable pricing, volume leverage and productivity gains. McClintock said the company recorded about 6% pricing in the second quarter and expects pricing to decline sequentially in the second half as it laps prior-year price increases. Watts has implemented selected price increases globally to address inflation linked to the Middle East conflict. Year-to-date free cash flow was $108 million, compared with $105 million a year earlier. The company said higher accounts receivable from increased sales and a strategic inventory investment affected cash flow, but it expects seasonal improvement in the second half. Watts maintained its goal of converting at least 90% of net income into free cash flow for the full year. Watts ended the quarter with a net debt-to-capitalization ratio of negative 12% and net leverage of negative 0.4 times. Pagano said the balance sheet provides capacity for strategic acquisitions, productivity investments, product development and other growth initiatives. The company completed five acquisitions in 2025 and said those businesses are performing well and remain on track to achieve or exceed targeted synergies. Watts raised its full-year organic sales growth outlook to 8% to 11% and now expects reported sales growth of 14% to 17%. The company also increased its forecasts for adjusted EBITDA margin and adjusted operating margin expansion to a range of 20 to 80 basis points. Americas organic sales are expected to rise 9% to 12%. Europe organic sales are projected to increase 1% to 4%. APMEA organic sales are forecast to grow 9% to 12%. Third-quarter organic sales growth is expected to be 5% to 8%. The guidance assumes no change in the Middle East conflict or in the current tariff structure. Watts also said it is excluding any potential refunds related to IEEPA tariffs from adjusted results. Management said residential single-family construction conditions have become “slightly worse” than in the prior quarter, while multifamily construction remains soft. Healthcare and education have held up better, according to Pagano, but other nonresidential new-construction activity remains subdued outside of data centers. “We are monitoring the macro environment, including tariffs, interest rates, and geopolitical developments,” Pagano said, adding that the company believes its repair-and-replacement exposure, which represents about 60% of sales, provides support across varying economic conditions. Watts Water Technologies, Inc is a global manufacturer and distributor of flow control products and solutions designed to ensure the safe, efficient delivery and use of water. Founded in 1874 and headquartered in North Andover, Massachusetts, the company has built a reputation for engineering innovation in residential, commercial and industrial plumbing, heating, cooling and water treatment systems. Watts operates through a comprehensive portfolio of brands and product lines that address application-specific requirements in water safety, pressure regulation, flow control and filtration. The company's product offerings span backflow preventers, pressure reducing valves, relief valves and steam traps, as well as hydronic balancing and temperature control devices for heating systems. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Watts Water Technologies Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Onto Innovation Inc. ONTO reported second-quarter 2026 earnings per share of $1.93, which exceeded the Zacks Consensus Estimate by 15%. The bottom line also compared favorably with the prior-year quarter's $1.25. Management expected non-GAAP EPS between $1.65 and $1.73. Onto Innovation reported second-quarter revenue of $343.1 million, marking a 35.3% year-over-year increase. Revenue also rose nearly 18% sequentially, setting a new record for the company's highest quarterly revenue. The top line surpassed both management’s guidance ($320–$330 million) and the Zacks Consensus Estimate of $325.6 million. Key factors driving this strong performance included record revenue from Advanced Nodes, record sales in Specialty Devices, robust growth in Advanced Packaging solutions and ongoing investments by leading logic and memory chip manufacturers. According to management, customer visibility remains high as semiconductor companies continue investing in multi-year expansion initiatives. One of the most notable highlights was the company's backlog surpassing $1 billion for the first time. The company expects these investments to support solid second-half 2026 revenue, sustained AI infrastructure spending and demand that extends well into 2027. The record backlog offers greater revenue visibility and indicates customer confidence despite broader macroeconomic uncertainties. Following the successful launch of Dragonfly G5, Onto Innovation is seeing record demand across a broader customer base, prompting it to raise its full-year advanced packaging growth outlook to about 80% from 50%. Demand is being driven by HBM manufacturers and OSATs supporting AI-focused heterogeneous packaging. During the quarter, the company secured more than $200 million in Dragonfly orders from a single OSAT customer, with most deliveries scheduled for 2027. Onto Innovation Inc. price-consensus-eps-surprise-chart | Onto Innovation Inc. Quote Advanced Packaging and Specialty Devices accounted for nearly half of second-quarter revenue. Dragonfly inspection revenue rose 30% sequentially, driven by 2.5D and HBM demand. At the same time, other packaging and specialty segments, including power and SDI, declined as expected but are projected to recover to first-quarter levels next quarter. Advanced Nodes revenue increased approximately 50% sequentially to $120 million, reflecting stronger customer spending on next-generation semiconductor technologies required for AI processors and high-performance computing chips. In this category, memory accounted for around 60% of revenue and increased about 60% sequentially, while logic advanced more than 40%. Software and services accounted for the remainder of the second quarter revenue. Non-GAAP gross margin was 57%, up 250 basis points (bps) year over year and 130 bps sequentially, exceeding management's initial target of 200 bps of margin expansion for 2026. Non-GAAP operating income rose to $102.8 million from $65.6 million in the prior-year quarter. Driven by stronger operating leverage, Onto Innovation's operating margin expanded to 30%, up nearly 500 bps from the beginning of the year. Total operating expenses for the quarter were $119.7 million compared with $89.9 million in the previous-year quarter. As of June 30, 2026, the company had $1.9 billion in cash, cash equivalents and marketable securities and $271.6 million of total current liabilities compared with $654.2 million and $214.5 million, respectively, as of March 31. Accounts receivable were $337.4 million. Onto Innovation generated $62 million in cash from operations during the quarter, representing just over 100% of net income. Driven by robust demand and strong execution, Onto Innovation raised its second-half 2026 revenue, margin and EPS outlook. Building on a strong first half, ONTO expects second-half revenue to grow more than 25%, with third-quarter revenue of $380–$400 million and further growth in the fourth quarter. At the midpoint, revenue guidance implies another sequential increase of roughly 14%, suggesting demand remains exceptionally strong. Despite ongoing cost headwinds, including higher material, fuel and freight expenses, Onto Innovation expects gross margin to expand by another 50 bps in each of third and fourth quarters. The company expects gross margin between 57.3% and 57.8%. Onto expects operating margin to improve by 200 bps to 31.5%-32.5% in the third quarter and exceed 33% by year-end. Per management, Onto Innovation is on track to deliver 350 bps of gross margin expansion and more than 750 bps of operating margin improvement in 2026, with further gains expected in 2027. It further expects non-GAAP EPS between $2.18 and $2.38, GAAP EPS of $1.54 to $1.70 and GAAP operating margin of 21.4% to 22.4%. Onto Innovation currently boasts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Watts Water Technologies, Inc. WTS reported second-quarter 2026 adjusted earnings of $3.66 per share, up 18.4% from $3.09 a year ago. The bottom line beat the Zacks Consensus Estimate of $3.34 by 9.6%. Net sales rose 18.6% year over year to $763.2 million and topped the consensus mark of $726 million by 5.1%. Organic sales advanced 12.2%, driven by favorable pricing, higher volumes and data center growth. Year-to-date data center sales represented 8% of total sales. TELUS Corporation TU reported second-quarter 2026 adjusted earnings per share of C$0.16, down 27% from C$0.22 a year ago. Adjusted net income fell 26% to C$254 million, while operating revenues and other income declined 3% to C$4,929 million, pressured by weaker TELUS Digital results, lower mobile equipment revenues and reduced other income. Fortive Corporation FTV reported second-quarter 2026 adjusted earnings of 74 cents per share, which jumped 28.5% year over year and topped the Zacks Consensus Estimate of 71 cents by 4.2%. Revenues rose 7.9% year over year to $1.10 billion and beat the consensus estimate of $1.06 billion by 3.5%. Core revenues increased 6.7%, reflecting price and volume growth in both operating segments. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Onto Innovation Inc. (ONTO) : Free Stock Analysis Report TELUS Corporation (TU) : Free Stock Analysis Report Watts Water Technologies, Inc. (WTS) : Free Stock Analysis Report Fortive Corporation (FTV) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Watts Water Technologies, Inc. WTS reported second-quarter 2026 adjusted earnings of $3.66 per share, up 18.4% from $3.09 a year ago. The bottom line beat the Zacks Consensus Estimate of $3.34 by 9.6%. Net sales rose 18.6% year over year to $763.2 million and topped the consensus mark of $726 million by 5.1%. Organic sales advanced 12.2%, driven by favorable pricing, higher volumes and data center growth. Year-to-date data center sales represented 8% of total sales. Shares of the company have gained 40.6% in the past year compared with the Zacks Manufacturing - General Industrial industry’s growth of 13.6%. Image Source: Zacks Investment Research Second-quarter data center sales more than tripled year over year. Demand was concentrated in the Americas and APMEA, while Europe represented an emerging opportunity. Management said project-based demand could create quarter-to-quarter variability. Watts Water is investing in talent, product innovation and capacity while expanding relationships with contractors, original equipment manufacturers and hyperscalers. The company estimates its served addressable data center market at about $2 billion, with potential content ranging from roughly $25,000 to $100,000 per megawatt. Americas sales increased 17.4% year over year to $585 million and rose 11.6% organically. Favorable pricing and higher volumes tied to data center demand supported the increase, while acquisitions added $28 million. Segment margin fell 150 basis points (bps) to 25.7%. Acquisition dilution, inflation, tariffs and a difficult comparison with a prior-year tariff-related price-cost benefit outweighed gains from pricing, volume leverage and productivity. Watts Water Technologies, Inc. price-consensus-eps-surprise-chart | Watts Water Technologies, Inc. Quote Europe sales rose 12.3% to $124.6 million, including 9.2% organic growth. Higher volumes and favorable pricing drove the advance, while foreign exchange contributed 3.1%. Segment margin expanded 160 bps to 13.3% as operating gains more than offset inflation. APMEA sales climbed 56.7% to $53.6 million and advanced 30.7% organically. Data center growth in China more than offset weaker Middle East activity. Acquisitions contributed 17.3% and foreign exchange added 8.7%, while segment margin improved 100 bps to 19.9%. Gross profit increased 14.8% to $374.1 million, though gross margin contracted 160 bps to 49.0%. Selling, general and administrative expenses rose 14.6% to $214.5 million. Adjusted operating income increased 15% to $160 million, while adjusted operating margin declined 60 bps to 21.0%. Adjusted EBITDA rose 15.5% to $176.7 million, but its margin decreased 70 bps to 23.1%. Acquisition dilution, inflation and tariffs pressured profitability, partly offset by price realization, volume leverage and productivity. For the first six months of 2026, operating cash flow declined to $120.8 million from $124.9 million. Free cash flow decreased to $98.2 million from $105.1 million, reflecting higher working capital and capital expenditures. The cash conversion rate fell to 45.1% from 60.1%. Watts Water ended June with $347.9 million in cash and $108 million of long-term debt, resulting in net cash of $239.9 million. The company repurchased about 13,000 shares for $4.1 million during the quarter, leaving roughly $121 million under its authorization. Management expects cash flow to improve sequentially in the second half as working capital is monetized. WTS now expects full-year reported sales growth of 14% to 17%, up from its prior 8% to 12% range. Organic growth is projected at 8% to 11% compared with the previous 2% to 6% outlook. Adjusted operating margin is forecast between 19.8% and 20.4%, while adjusted EBITDA margin is expected between 22.1% and 22.7%. For the third quarter, management expects reported sales growth of 11% to 14% and organic growth of 5% to 8%. Adjusted operating margin is projected between 19.8% and 20.4%, with adjusted EBITDA margin of 22.2% to 22.8%. The outlook assumes no change in the Middle East conflict's impact and includes tariffs announced through Aug. 4, 2026. On Aug. 3, 2026, WTS also declared a quarterly dividend of 63 cents per share, payable on Sept. 15, 2026, to shareholders of record as of Sept. 1, 2026. Watts Water currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Flowserve Corporation’s FLS second-quarter 2026 adjusted earnings of 95 cents per share beat the Zacks Consensus Estimate of 86 cents by 10.5%. The bottom line increased 4.4% year over year. The company generated revenues of $1.17 billion, which surpassed the Zacks Consensus Estimate of $1.16 billion by 0.9%. However, sales declined 1.6% year over year. Strong bookings growth and operating-margin expansion, along with a record aftermarket bookings performance, supported the quarterly results. Generac Holdings Inc. GNRC reported second-quarter 2026 adjusted earnings per share (EPS) of $2.91, which beat the Zacks Consensus Estimate of $1.95. GNRC registered an adjusted EPS of $1.65 in the prior-year quarter. Net sales were $1.173 billion, up 11% from $1.06 billion in the prior-year quarter. The figure missed the consensus estimate by 0.4%. Zebra Technologies Corporation ZBRA reported second-quarter 2026 adjusted earnings of $6.35 per share, which beat the Zacks Consensus Estimate of $4.35. The bottom line increased 75.9% from $3.61 per share reported in the year-ago quarter. Total revenues of $1.56 billion surpassed the consensus estimate of $1.50 billion. The top line increased 20.4% year over year, supported by broad-based growth across segments and regions. Consolidated organic net sales increased 9.2% year over year. Acquisitions contributed 8.7% to reported sales growth, while favorable foreign currency translation contributed 2.5%. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Flowserve Corporation (FLS) : Free Stock Analysis Report Watts Water Technologies, Inc. (WTS) : Free Stock Analysis Report Generac Holdings Inc. (GNRC) : Free Stock Analysis Report Zebra Technologies Corporation (ZBRA) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Organic sales growth of 12% was primarily driven by a tripling of data center revenue and favorable price realization, which successfully offset headwinds from the 80/20 product rationalization program. Management attributed the 60 basis point adjusted operating margin decline to anticipated dilution from five 2025 acquisitions and a difficult year-over-year comparison against a one-time price/cost benefit. The data center strategy is shifting toward liquid cooling applications, which management notes offer significantly higher content opportunities per megawatt compared to traditional air-cooled systems. Operational resilience in the APMEA region was supported by an 'in-country, for-country' business model in Saudi Arabia, which effectively insulated local operations from broader Middle East geopolitical disruptions. The 80/20 rationalization initiative remains a core strategic focus, intentionally reducing lower-margin sales to improve long-term portfolio health, resulting in a 1% drag on organic growth this quarter. Management emphasized that 60% of total sales are derived from repair and replacement activity, providing a defensive foundation that balances the current softness in residential and non-institutional new construction. Full-year organic sales guidance was raised to 8%-11%, reflecting stronger-than-expected data center demand and price realization in Europe and APMEA. The updated margin outlook assumes that price, volume leverage, and productivity gains will more than offset persistent inflation and a 50 basis point dilutive impact from recent acquisitions. Guidance for the second half of 2026 assumes no further interest rate reductions and a stable tariff environment, despite ongoing uncertainty regarding global trade policies. Management expects data center sales to reach mid-to-high single digits as a percentage of total company revenue for the full year, up from just 3% in the prior year. Third-quarter projections include a sequential decline in price realization as the company laps prior-year increases, alongside anticipated pull-forward demand impacts from Q2. The Middle East conflict continues to present supply chain and inflationary headwinds, though management is mitigating these through targeted pricing actions and productivity initiatives. A non-recurring tax benefit from the reversal of a prior-year liability contributed to a 210 basis point improvement in the effective tax rate for the quarter. Inventory levels were strategically increased to support the variability and project-based nature of the data center business, impacting year-to-date free cash flow. Management flagged that any potential IEPA tariff refunds will be treated as non-recurring special items and are excluded from the current adjusted financial outlook. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. The TAM doubling from $1 billion to $2 billion reflects the inclusion of European and Middle Eastern markets, as well as the addition of thermal storage tank solutions. Management noted that the shift toward liquid cooling is a primary driver of the expanded market opportunity. Content ranges from $25,000 to $100,000 per megawatt, with the high end representing liquid-cooled facilities utilizing thermal storage tanks. U.S. projects currently trend toward the higher end of the range due to the availability and adoption of the new Cool Vault product line. Visibility is typically limited to approximately five months, as hyperscalers often finalize piping and valve designs very late in the construction process. To manage this 'lumpy' demand, the company is maintaining higher inventory levels of various component sizes to ensure on-time delivery. While data center sales can be slightly dilutive to gross margin, they are accretive to operating margin due to a very low operating expense burden. Management confirmed there is no significant margin mix issue between U.S. and China-based data center projects.

Watts Water (WTS) came out with quarterly earnings of $3.66 per share, beating the Zacks Consensus Estimate of $3.34 per share. This compares to earnings of $3.09 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +9.58%. A quarter ago, it was expected that this maker of valves for plumbing, heating and water needs would post earnings of $2.72 per share when it actually produced earnings of $3.04, delivering a surprise of +11.76%. Over the last four quarters, the company has surpassed consensus EPS estimates four times. Watts Water, which belongs to the Zacks Manufacturing - General Industrial industry, posted revenues of $763.2 million for the quarter ended June 2026, surpassing the Zacks Consensus Estimate by 5.16%. This compares to year-ago revenues of $643.7 million. The company has topped consensus revenue estimates four times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Watts Water shares have added about 29.7% since the beginning of the year versus the S&P 500's gain of 13%. While Watts Water has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Watts Water was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $2.93 on $675.74 million in revenues for the coming quarter and $12.23 on $2.75 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Manufacturing - General Industrial is currently in the top 22% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Nordson (NDSN), another stock in the same industry, has yet to report results for the quarter ended July 2026. The results are expected to be released on August 19. This maker of adhesives and industrial coatings is expected to post quarterly earnings of $3.09 per share in its upcoming report, which represents a year-over-year change of +13.2%. The consensus EPS estimate for the quarter has been revised 1.4% higher over the last 30 days to the current level. Nordson's revenues are expected to be $779 million, up 5.1% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Watts Water Technologies, Inc. (WTS) : Free Stock Analysis Report Nordson Corporation (NDSN) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Net sales of $763 million, up 19% on a reported basis and 12% organically Operating margin of 20.2%, down 80 bps; adjusted operating margin of 21.0%, down 60 bps Diluted EPS of $3.53, up 17%; adjusted diluted EPS of $3.66, up 18% Increasing full year 2026 sales and margin outlook Note changes in performance are relative to second quarter 2025 NORTH ANDOVER, Mass., August 05, 2026--(BUSINESS WIRE)--Watts Water Technologies, Inc. (NYSE: WTS) – through its subsidiaries, one of the world’s leading manufacturers and providers of plumbing, heating and water quality products and solutions – today announced results for the second quarter of 2026. Chief Executive Officer Robert J. Pagano Jr. said, "We delivered another strong quarter, achieving record sales, operating income and EPS, with double-digit organic growth. These results reflect the strength of our diversified portfolio, disciplined execution, and our ability to capture long-term growth opportunities. Building on our first half performance, we are increasing our full year 2026 sales and margin outlook. While the trade and geopolitical environments remain dynamic, our teams continue to execute well and remain focused on serving our customers. Through continued investments in innovation, digital capabilities and the One Watts Performance System, we are enhancing our competitive position and expanding opportunities for profitable growth across our portfolio. This includes attractive markets such as data centers, where our differentiated capabilities continue to drive strong customer demand and where we see significant opportunity ahead. Supported by our healthy balance sheet, consistent cash generation and disciplined capital allocation, we believe we are well positioned to continue delivering value for our customers and shareholders. I would like to thank the Watts team for their commitment and dedication, which continue to drive our success." A summary of second quarter financial results is as follows: Second Quarter Financial HighlightsSecond quarter 2026 performance compared to second quarter 2025 Sales of $763 million increased 19% on a reported basis and 12% on an organic basis, primarily due to favorable price realization and higher volume driven by data center growth. Acquisition sales within the Americas and APMEA contributed $34 million, or 5%, to reported sales growth. Favorable foreign exchange contributed $7 million, or 1%, to reported sales growth. Operating margin decreased 80 basis points on a reported basis, and 60 basis points on an adjusted basis. Operating and adjusted operating margin decreased primarily due to acquisition dilution, inflation and tariffs, and the difficult comparison against the one-time tariff-related price/cost benefit in the prior year, partly offset by favorable price realization, sales volume leverage, and productivity. Operating margin was also unfavorably impacted by an increase in restructuring charges. Regional Performance AmericasSales of $585 million increased 17% on a reported basis and 12% on an organic basis, primarily due to favorable price realization and higher volume driven by data center growth. Acquisition sales contributed $28 million, or 6%, to reported sales growth. Segment margin decreased 150 basis points primarily due to acquisition dilution, inflation and tariffs, and the difficult comparison against the one-time tariff-related price/cost benefit in the prior year, partly offset by favorable price realization, sales volume leverage, and productivity. EuropeSales of $125 million increased 12% on a reported basis and 9% on an organic basis, primarily due to higher volumes and favorable price realization. Favorable foreign exchange contributed 3% to reported sales growth. Segment margin increased 160 basis points primarily due to favorable price realization, sales volume leverage, and productivity, which more than offset higher inflation. APMEASales of $54 million increased 57% on a reported basis and 31% on an organic basis. Organic growth was primarily due to higher volume driven by data center growth in China partly offset by a decline in the Middle East. Acquisition sales contributed $6 million, or 17%, and favorable foreign exchange contributed 9% to reported sales growth. Segment margin increased 100 basis points primarily due to favorable price realization and acquisition accretion, which more than offset inflation and cost headwinds from the Middle East conflict. Cash Flow and Capital Allocation For the first six months of 2026, operating cash flow was $121 million and net capital expenditure was $23 million, resulting in free cash flow of $98 million. In the comparable period last year, operating cash flow was $125 million and net capital expenditure was $20 million, resulting in free cash flow of $105 million. Free cash flow declined due to higher working capital levels and increased capital expenditures, which more than offset higher net income. Working capital increases were due to higher accounts receivable attributable to higher net sales, higher inventory due to incremental tariffs and strategic inventory investments to support expected end-market demand. Sequential increases in free cash flow are expected in the second half of 2026 as we monetize working capital with the seasonality of the business. The Company repurchased approximately 13,000 shares of Class A common stock at a cost of $4.1 million during the second quarter of 2026. Approximately $121 million remains available under the stock repurchase program authorized in 2023. There is no expiration date for this program. Full Year 2026 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. Sales growth is expected to range from up 14% to up 17% on a reported basis and up 8% to up 11% on an organic basis. Full year operating margin is expected to be between 19.4% and 20.0%, or up 100 basis points to up 160 basis points, and adjusted operating margin is expected to be between 19.8% and 20.4%, or up 20 basis points to up 80 basis points. The full year outlook assumes no change in the level of impact resulting from the Middle East conflict and incorporates the estimated impact of tariffs in place or announced as of August 4, 2026. The full year outlook does not include the impact of tariff refunds, and any tariff refunds received in future periods will be treated as non-recurring special items and therefore will not be included in our adjusted results. Further 2026 planning assumptions are included in the second quarter earnings materials posted in the Investor Relations section of our website at www.watts.com. For a reconciliation of GAAP to non-GAAP items and a statement regarding the usefulness of these measures to investors and management in evaluating our operating performance, please see the tables attached to this press release. Watts Water Technologies, Inc. will hold a live webcast of its conference call to discuss second quarter 2026 results on Thursday, August 6, 2026 at 9:00 a.m. EDT. This press release and the live webcast can be accessed by visiting the Investor Relations section of the Company's website at www.watts.com. Following the webcast, the call recording will be available at the same address until August 5, 2027. Watts Water Technologies, Inc., through its subsidiaries, is a world leader in the manufacturing of innovative products to control the efficiency, safety, and quality of water within residential, commercial, and institutional applications. Watts’ expertise in a wide variety of water technologies enables us to be a comprehensive supplier to the water industry. This press release includes "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995, including statements relating to expected full year 2026 financial results, including sales and organic sales growth, operating margin and adjusted operating margin, improvements in free cash flow in the second half of 2026, our strategy, investments, our ability to target and capitalize on growing markets, including our data center initiative, the impact of tariffs and any tariff refunds received as a result of the invalidation of tariffs imposed under the International Emergency Economic Powers Act, the benefits from and integration of acquisitions, our ability to manage uncertainty and current market conditions, including the fluid trade environment, future dividends, long-term growth and shareholder value creation. These forward-looking statements reflect our current views about future events. You should not rely on forward-looking statements because our actual results may differ materially from those predicted as a result of a number of potential risks and uncertainties. These potential risks and uncertainties include, but are not limited to: the continued growth of our customers’ markets; the imposition of or changes to tariff rates and related impacts to our business and the broader market; the effectiveness, timing and expected savings associated with our cost-cutting actions, restructuring and initiatives; integration of acquired businesses in a timely and cost-effective manner, retention of supplier and customer relationships and key employees, and the ability to achieve synergies and cost savings in the amounts and within the timeframes currently anticipated; current economic and financial conditions, which can affect the housing and construction markets where our products are sold, manufactured and marketed; shortages in and pricing of raw materials and supplies; our ability to compete effectively; changes in variable interest rates on our borrowings; inflation; failure to expand our markets through acquisitions; failure to successfully develop and introduce new product offerings or enhancements to existing products; failure to manufacture products that meet required performance and safety standards; foreign exchange rate fluctuations; cyclicality of industries where we market our products, such as plumbing and heating wholesalers and home improvement retailers; environmental compliance costs; product liability risks and costs; changes in the status of current litigation; the impacts and duration of the Middle East conflict, the war in Ukraine and other global crises; supply chain and logistical disruptions or labor shortages and workforce disruptions that could negatively affect our supply chain, manufacturing, distribution, or other business processes; and other risks and uncertainties discussed under the heading "Item 1A. Risk Factors" and in Note 17 of the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission ("SEC"). We undertake no duty to update the information contained in this press release, except as required by law. Segment Earnings and Non-GAAP Financial Measures In this press release, segment earnings is our GAAP performance measure used by our chief operating decision-maker ("CODM") to assess and evaluate segment results. Segment earnings exclude the impact of non-recurring and unusual items, such as restructuring costs and acquisition-related costs. The CODM uses segment earnings for insight into underlying trends comparing past financial performance with current performance by reporting segment on a consistent basis. Segment margin is defined as segment earnings divided by segment revenue. We refer to non-GAAP financial measures (including adjusted operating income, adjusted operating margin, adjusted net income, adjusted diluted earnings per share, organic sales, organic sales growth, free cash flow, cash conversion rate of free cash flow to net income and net debt to capitalization ratio) and provide a reconciliation of those non-GAAP financial measures to the corresponding financial measures contained in our consolidated financial statements prepared in accordance with GAAP. We believe these financial measures enhance the overall understanding of our historical financial performance and give insight into our future prospects. Adjusted operating income, adjusted operating margin, adjusted net income and adjusted diluted earnings per share eliminate certain expenses incurred and benefits recognized in the periods presented that relate primarily to our global restructuring programs, acquisition-related costs and the related income tax impacts on these items and tax adjustment items (with respect to adjusted net income and adjusted diluted earnings per share only). Management then utilizes these adjusted financial measures to assess the run rate of the Company’s operations against those of comparable periods. Organic sales and organic sales growth are non-GAAP measures of net sales and net sales growth excluding the impacts of foreign exchange, acquisitions and divestitures from period-over-period comparisons. Management believes reporting organic sales and organic sales growth provides useful information to investors, potential investors and others, and allows for a more complete understanding of underlying sales trends by providing sales and sales growth on a consistent basis. Free cash flow, cash conversion rate of free cash flow to net income, and the net debt to capitalization ratio, which are adjusted to exclude certain cash inflows and outlays, and include only certain balance sheet accounts from the comparable GAAP measures, are an indication of our performance in cash flow generation and also provide an indication of the Company's balance sheet leverage relative to other industrial manufacturing companies. These non-GAAP financial measures are among the primary indicators management uses as a basis for evaluating our cash flow generation and our capitalization structure. In addition, free cash flow is used as a criterion to measure and pay certain compensation-based incentives. For these reasons, management believes these non-GAAP financial measures can be useful to investors, potential investors and others. The Company’s non-GAAP financial measures may not be comparable to similarly titled measures reported by other companies. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial measures prepared in accordance with GAAP. View source version on businesswire.com: https://www.businesswire.com/news/home/20260805319284/en/ Contacts Ray NashVP FP&A and Investor Relationsemail: [email protected]