As the Q3 earnings season wraps, let’s dig into this quarter’s best and worst performers in the water infrastructure industry, including Mueller Water Products (NYSE:MWA) and its peers.
Trends towards conservation and reducing groundwater depletion are putting water infrastructure and treatment products front and center. Companies that can innovate and create solutions–especially automated or connected solutions–to address these thematic trends will create incremental demand and speed up replacement cycles. On the other hand, water infrastructure and treatment companies are at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.
The 5 water infrastructure stocks we track reported a strong Q3. As a group, revenues beat analysts’ consensus estimates by 1.2%.
While some water infrastructure stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 3.8% since the latest earnings results.
Mueller Water Products (NYSE:MWA)
As one of the oldest companies in the water infrastructure industry, Mueller (NYSE:MWA) is a provider of water infrastructure products and flow control systems for various sectors.
Mueller Water Products reported revenues of $348.2 million, up 15.5% year on year. This print exceeded analysts’ expectations by 6.5%. Overall, it was a very strong quarter for the company with a solid beat of analysts’ organic revenue estimates and an impressive beat of analysts’ EBITDA estimates.
“We delivered a strong fourth quarter with healthy order levels supported by steady end market demand and focused customer service. We achieved record fourth quarter net sales and adjusted EBITDA, which exceeded our expectations and continued to expand margins through increased volumes, consistent operational execution and disciplined SG&A spending,” said Martie Edmunds Zakas, Chief Executive Officer of Mueller Water Products.
Mueller Water Products scored the biggest analyst estimates beat and fastest revenue growth of the whole group. Investor expectations, however, were likely higher than Wall Street’s published projections, leaving some wishing for even better results (analysts’ consensus estimates are those published by big banks and advisory firms, not the investors who make buy and sell decisions). The stock is down 3.3% since reporting and currently trades at $23.18.
Is now the time to buy Mueller Water Products? Access our full analysis of the earnings results here, it’s free.
Best Q3: Energy Recovery (NASDAQ:ERII)
Having saved far more than a trillion gallons of water, Energy Recovery (NASDAQ:ERII) provides energy recovery devices to the water treatment, oil and gas, and chemical processing sectors.
Energy Recovery reported revenues of $38.58 million, up 4.2% year on year, outperforming analysts’ expectations by 3.2%. The business had an incredible quarter with a solid beat of analysts’ EPS estimates and an impressive beat of analysts’ EBITDA estimates.
Although it had a fine quarter compared to its peers, the market seems unhappy with the results as the stock is down 17.7% since reporting. It currently trades at $14.70.
Is now the time to buy Energy Recovery? Access our full analysis of the earnings results here, it’s free.
Weakest Q3: Xylem (NYSE:XYL)
Formed through a spinoff, Xylem (NYSE:XYL) manufactures and services engineered products across a wide variety of applications primarily in the water sector.
Xylem reported revenues of $2.10 billion, up 1.3% year on year, falling short of analysts’ expectations by 3.2%. It was a slower quarter as it posted a significant miss of analysts’ organic revenue and adjusted operating income estimates.
Xylem delivered the weakest performance against analyst estimates, slowest revenue growth, and weakest full-year guidance update in the group. As expected, the stock is down 6.8% since the results and currently trades at $121.50.
Read our full analysis of Xylem’s results here.
Tennant (NYSE:TNC)
As the world’s largest manufacturer of autonomous mobile robots, Tennant (NYSE:TNC) designs, manufactures, and sells cleaning products to various sectors.
Tennant reported revenues of $315.8 million, up 3.6% year on year. This result missed analysts’ expectations by 1.1%. Overall, it was a slower quarter as it also recorded a miss of analysts’ EPS and EBITDA estimates.
Tennant delivered the highest full-year guidance raise among its peers. The stock is flat since reporting and currently trades at $88.13.
Read our full, actionable report on Tennant here, it’s free.
Watts Water Technologies (NYSE:WTS)
Founded in 1874, Watts Water (NYSE:WTS) specializes in manufacturing water products and systems for residential, commercial, and industrial applications globally.
Watts Water Technologies reported revenues of $543.6 million, up 7.8% year on year. This number was in line with analysts’ expectations. Overall, it was a satisfactory quarter as it also produced a decent beat of analysts’ adjusted operating income estimates.
The stock is up 7.9% since reporting and currently trades at $213.
Read our full, actionable report on Watts Water Technologies here, it’s free.
Market Update
Thanks to the Fed's series of rate hikes in 2022 and 2023, inflation has cooled significantly from its post-pandemic highs, drawing closer to the 2% goal. This disinflation has occurred without severely impacting economic growth, suggesting the success of a soft landing. The stock market thrived in 2024, spurred by recent rate cuts (0.5% in September and 0.25% each in November and December), and a notable surge followed Donald Trump's presidential election win in November, propelling indices to historic highs. Nonetheless, the outlook for 2025 remains clouded by the pace and magnitude of future rate cuts as well as potential changes in trade policy and corporate taxes once the Trump administration takes over. The path forward is marked by uncertainty.
Want to invest in winners with rock-solid fundamentals? Check out our Strong Momentum Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.
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