Watts Water Technologies (WTS) Q2 2026 earnings summary

Executive summary

• Achieved record Q2 2026 sales of $763 million, up 19% year-over-year and 12% organically, driven by strong data center demand, favorable pricing, and recent acquisitions, despite headwinds from product rationalization and acquisition dilution.

• Data center sales more than tripled year-over-year, now representing 8% of total sales for the first half, with full-year mix expected in the mid to high single digits, up from 3% last year.

• Raised full-year 2026 sales and margin outlooks due to strong first half and robust Q3 expectations, with continued momentum in data centers, Europe, and APMEA.

• Integration of 2025 acquisitions progressing well, with targeted synergies on track or exceeded, leveraging the One Watts Performance System.

• Resilient performance despite macroeconomic and geopolitical headwinds, including Middle East conflict, inflation, and evolving tariff environment.

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), and adjusted operating income was $160 million (21% margin), both up 15% year-over-year.

• Adjusted EPS grew 18% to $3.66; net income for Q2 was $118.3 million ($3.53 per diluted share), up 17%.

• Free cash flow for the first half was $98 million, with a target of ≥90% net income conversion for the year.

• Adjusted effective tax rate was 23.1%, benefiting from a non-recurring tax reversal.

Outlook and guidance

• Full-year 2026 organic sales growth expected at 8%-11%, reported sales up 14%-17%.

• Americas organic sales to rise 9%-12%, Europe 1%-4%, APMEA 9%-12%.

• Adjusted operating margin forecasted at 19.8%-20.4% for the year; margin expansion driven by price, volume, and productivity.

• Q3 reported sales expected to increase 11%-14%, with organic growth of 5%-8%.

• Free cash flow conversion expected to remain ≥90% of net income.