Watts Water Technologies, Inc. (WTS) Q2 2026 Earnings Call

Investor webinar replay

Replay transcript excerpt

Reference to Non-GAAP Financial Information is reconciled in the appendix to the presentation. With that, I will turn the call over to Bob. Thank you, Ray. Welcome to your first earnings call with Watts. Good morning, everyone. Please turn to slide three, 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 the one-time 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 Watch performance system. As a reminder, we completed five acquisitions in 2025 to expand our portfolio, strengthen our market reach, and increase exposure to non-residential markets. Overall, these businesses are performing well, and we remain on track to achieve or exceed our targeted synergie...