Mueller Water Products outlines 2026 guidance with $1.45B–$1.47B net sales target and CEO transition

Earnings Call Insights: Mueller Water Products (MWA) Q4 2025

MANAGEMENT VIEW

* CEO Marietta Zakas announced her retirement, effective February 9, 2026, after nearly two decades with Mueller. Zakas stated, “Paul has played an important role in these achievements. His deep understanding of our industry, portfolio of products and solutions, operations and customer relationships combined with his leadership positions Mueller for continued success. The transition will be effective February 9, 2026, and I will serve as a special adviser through the end of calendar 2026 to ensure a smooth handover.”
* Zakas highlighted, “We closed the year on an exceptional note, delivering another record-breaking performance with our fourth quarter net sales and adjusted EBITDA exceeding the high end of our expectations. Net sales growth of 9.4% in the quarter reflected strong volume gains and improved price realization... consolidated gross margin expansion of 500 basis points in the fourth quarter.”
* President & COO Paul McAndrew noted, “We delivered double-digit net sales growth for iron gate valves and specialty valves, hydrants and repair products. Our specialty valve portfolio continues to perform exceptionally well since transitioning to the new facility in Kimball.”
* McAndrew signaled increased capital investment: “Planned equipment upgrades of these foundries, along with other key projects, are expected to increase capital expenditures to 4% to 5% of net sales over the next 3 years.”
* CFO Melissa Rasmussen reported, “Net sales grew 9.4% to $380.8 million, setting a new quarterly record. This growth was primarily driven by increased volumes and higher pricing across most product lines, with both segments delivering an exceptional finish to the year.”

OUTLOOK

* Mueller expects consolidated net sales between $1.45 billion and $1.47 billion in fiscal 2026, representing year-over-year growth between 1.4% and 2.8%.
* Rasmussen stated, “We expect our adjusted EBITDA will range from $345 million to $350 million, reflecting year-over-year growth of 5.8% to 7.3%. At the midpoint of our guidance range, adjusted EBITDA achieved a 23.8% margin for the year, reflecting a 100 basis point year-over-year improvement.”
* Guidance includes benefits from previous pricing actions and planned investments, but does not include potential future price increases, which would be communicated to customers before public disclosure.

FINANCIAL RESULTS

* Adjusted net income per share grew 73% year-over-year to $0.38 per share in Q4.
* Annual net sales rose 8.7% to over $1.4 billion, adjusted EBITDA increased 14.6% year-over-year to $326 million, and adjusted EBITDA margin expanded 110 basis points year-over-year to 22.8%.
* Free cash flow for the year reached $172 million, with $57 million returned to shareholders through dividends and repurchases.
* Rasmussen detailed, “Operating income increased 145.1% in the quarter to $69.6 million compared with the prior year. Operating income includes $3.7 million of strategic reorganization and other charges as well as a $5.6 million warranty charge at Water Management Solutions.”
* Segment performance noted: WFS net sales up 8.6% to $217.5 million, WMS net sales up 10.4% to $163.3 million.

Q&A

* Bryan Blair, Oppenheimer: Asked about muni and residential market dynamics and their influence on revenue guidance. Rasmussen explained that residential construction is expected to be down in the high single-digit range, while municipal repair and replacement, as well as specialty valves, should offset this with low to high single-digit growth.
* Blair, Oppenheimer: Sought further details on capital deployment and M&A. McAndrew stated multiyear investments in iron foundries would not yield margin benefits in 2026 but would position for future growth. Zakas noted active pursuit of acquisitions to expand the product portfolio within water infrastructure.
* Brian Lee, Goldman Sachs: Inquired about margin trajectory and segment cadence. Rasmussen answered that both segments are expected to see margin expansion in the second half of the year, with tariff impacts managed through targeted pricing actions.
* Michael Halloran, Baird: Asked about channel inventory and backlog normalization. McAndrew responded that inventory is at normal levels and seasonal patterns are expected for 2026.
* Deane Dray, RBC: Asked about government shutdown impacts. Zakas said no noticeable impacts had been observed and federal funding from previous infrastructure bills would have no material impact in 2026.
* Christopher Grenga, TD Cowen: Sought updates on leak detection initiatives. Zakas discussed a new hydrant renewal product including leak detection technology, currently in pilot trials with broader rollout expected in 2026.
* Walter Liptak, Seaport Research: Asked about further margin expansion opportunities and transformation progress. Zakas noted continued margin expansion is anticipated and investments in operations and digital customer experience will drive future growth.

SENTIMENT ANALYSIS

* Analysts were generally positive and congratulatory, focusing on growth, margin expansion, and capital deployment, but raised questions on residential market softness, channel normalization, and the timing/impact of tariffs and government funding.
* Management maintained a confident and upbeat tone during prepared remarks, with Zakas emphasizing record results and future growth and McAndrew and Rasmussen outlining operational and financial discipline. During Q&A, management was detailed and direct, notably when addressing margin trajectory and capital investments, but acknowledged challenges such as tariffs and residential market headwinds.
* Compared to the previous quarter, both management and analysts displayed increased confidence, with less emphasis on uncertainty and more focus on ongoing investments and execution.

QUARTER-OVER-QUARTER COMPARISON

* The current quarter featured a major leadership transition announcement and reaffirmed focus on capital investments in foundries and operational upgrades, compared to the prior quarter’s focus on tariff mitigation and manufacturing efficiencies.
* Net sales growth accelerated to 9.4% from 6.6% in the previous quarter, and adjusted EBITDA margin expanded from 22.7% to 24.1% in Q4.
* Guidance for 2026 net sales and EBITDA marks a shift from the prior quarter’s raised 2025 outlook, with management now targeting normalized seasonality and sustained margin improvements.
* Analyst questions shifted from tariff and FX headwinds to the sustainability of growth drivers and the outlook for capital deployment and M&A.

RISKS AND CONCERNS

* Management cited high single-digit decline anticipated in residential construction as a key headwind in 2026, though offset by municipal and specialty valve growth.
* Tariffs remain a material cost concern, with annualized impact estimated at approximately 3% of cost of sales, but management is focused on targeted pricing and supply chain initiatives to mitigate these effects.
* Warranty charge in the WMS segment and strategic reorganization expenses were recognized in Q4.
* Management highlighted the uncertainty in the external environment and slow rollout of federal infrastructure funding, but reiterated strong liquidity and balance sheet flexibility.

FINAL TAKEAWAY

Mueller Water Products closed 2025 with record-breaking results, significant margin expansion, and robust free cash flow, while announcing a CEO transition and increased focus on capital investment in core facilities. Management projects continued net sales growth and margin improvement in 2026, balancing anticipated residential market declines with resilient municipal demand and ongoing operational upgrades. The company maintains flexibility for strategic acquisitions and further growth, supported by a strong financial position and disciplined execution.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/mwa/earnings/transcripts]

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