As the Q3 earnings season wraps, let’s dig into this quarter’s best and worst performers in the water infrastructure industry, including Watts Water Technologies (NYSE: WTS) 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 very strong Q3. As a group, revenues beat analysts’ consensus estimates by 3.8%.
Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 6.6% since the latest earnings results.
Best Q3: 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 $611.7 million, up 12.5% year on year. This print exceeded analysts’ expectations by 6.2%. Overall, it was a stunning quarter for the company with an impressive beat of analysts’ organic revenue estimates and a solid beat of analysts’ EBITDA estimates.
Chief Executive Officer Robert J. Pagano Jr. said, “We achieved strong third quarter results that exceeded our expectations driven by strong execution in our Americas region, which more than offset market weakness in Europe. Our global supply chain strategy, and targeted pricing actions have enabled us to mitigate tariff related cost increases. As a result of our strong third quarter performance and our fourth quarter expectations, we are increasing our full year 2025 sales and margin outlook.”
Watts Water Technologies pulled off the 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 2.3% since reporting and currently trades at $275.85.
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 $2.27 billion, up 7.8% year on year, outperforming analysts’ expectations by 1.9%. The business had an exceptional quarter with a solid beat of analysts’ EBITDA estimates and an impressive beat of analysts’ adjusted operating income estimates.
The market seems content with the results as the stock is up 1.1% since reporting. It currently trades at $151.05.
Is now the time to buy Xylem? Access our full analysis of the earnings results here, it’s free for active Edge members.
Weakest Q3: 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 $303.3 million, down 4% year on year, falling short of analysts’ expectations by 0.9%. It was a slower quarter as it posted a significant miss of analysts’ EPS estimates and a slight miss of analysts’ revenue estimates.
Tennant delivered the highest full-year guidance raise but had the weakest performance against analyst estimates in the group. As expected, the stock is down 7.3% since the results and currently trades at $73.93.
Read our full analysis of Tennant’s results here.
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 $380.8 million, up 9.4% year on year. This print beat analysts’ expectations by 5.2%. It was a very strong quarter as it also recorded an impressive beat of analysts’ organic revenue estimates and a solid beat of analysts’ revenue estimates.
Mueller Water Products had the weakest full-year guidance update among its peers. The stock is down 6% since reporting and currently trades at $23.50.
Read our full, actionable report on Mueller Water Products here, it’s free for active Edge members.
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 $32 million, down 17.1% year on year. This number surpassed analysts’ expectations by 6.9%. Overall, it was a strong quarter as it also put up a solid beat of analysts’ revenue estimates and a beat of analysts’ EPS estimates.
Energy Recovery delivered the biggest analyst estimates beat but had the slowest revenue growth among its peers. The stock is down 18.7% since reporting and currently trades at $14.02.
Read our full, actionable report on Energy Recovery here, it’s free for active Edge members.
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% in November), 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 potential trade policy changes and corporate tax discussions, which could impact business confidence and growth. The path forward holds both optimism and caution as new policies take shape.
Want to invest in winners with rock-solid fundamentals? Check out our Top 6 Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
