Watts Water Technologies (WTS) Q2 2026 earnings summary

Executive summary

• Achieved record Q2 2026 sales of $763.2 million, up 19% year-over-year and 12% organically, driven by strong data center demand, favorable pricing, and successful integration of recent acquisitions.

• Operating income rose 14% to $154 million; adjusted operating income was $160 million (21% margin, down 60 bps), with EPS up 17% to $3.53 and adjusted EPS up 18% to $3.66.

• Integration of five 2025 acquisitions is progressing well, expanding the portfolio and increasing non-residential market exposure.

• Data center sales more than tripled year-over-year, now representing 8% of total sales for the first half, with a global addressable market estimated at $2 billion.

• Sustainability initiatives advancing, with the 2025 Sustainability Report published and progress on environmental goals.

Financial highlights

• Q2 net sales reached $763.2 million, up 19% year-over-year; organic sales up 12%.

• Adjusted EBITDA was $177 million (23.1% margin, down 70 bps); adjusted operating margin was 21.0%, down 60 bps due to acquisition dilution and inflation.

• Net income for Q2 was $118.3 million, up 17% year-over-year; free cash flow for the first half was $98 million, with a target of ≥90% net income conversion for the year.

• Dividend per share for the quarter was $0.63, up from $0.52 year-over-year.

• Net debt-to-capitalization at -12.3%; net leverage at -0.4x.

Outlook and guidance

• Raised full-year 2026 organic sales growth outlook to 8%-11% (reported sales up 14%-17%), with Americas up 9%-12%, Europe up 1%-4%, and APMEA up 9%-12%.

• Full-year adjusted operating margin expected at 19.8%-20.4%; EBITDA margin to expand 20-80 bps.

• Q3 guidance: reported sales up 11%-14%, organic sales up 5%-8%, EBITDA margin 22.2%-22.8%, operating margin 19.8%-20.4%.

• Free cash flow expected to be ≥90% of net income for the year.

• Outlook incorporates ongoing Middle East conflict, inflation, and current tariff environment.