remember when Evian launched their ad campaigns here in the US in 80s,
water for what then seemed like astronomical prices (who knew they were
the United States, a liter of bottled water can cost up to $3 per
a similar volume of tap water costs less than one cent.
According to a NRDC study over 12 years ago,
U.S. consumers paid between 240 and 10,000 times more per unit volume
bottled water than for tap water.
are 119.24 liters in a barrel, which
means that a barrel of premium water would cost about $360 or 4.5 times
make things even more complicated, bottled water and tap water are
different federal agencies: the Food and Drug Administration (FDA)
bottled water and the Environmental Protection Agency (EPA) oversees
quality of tap water.
studies have found that the enforcement and monitoring of water quality
and inconsistent for both tap water and bottled water. But contrary to
Tap water contamination incidents must be reported promptly to the
the same is not true for bottled water.
bottom line is that even though we pay a premium for our drinking
potable water flowing constantly through the pipes in our homes and
is crucial and highly regulated. In
certain cities it doesn’t taste so bad either.
tap water renaissance would be wonderful for today’s Bull of the
& Co. (MWA - Snapshot Report),
but more realistic for its growth are the necessary improvements
to American water infrastructure. It’s a
trend that’s not only needed, but demanded by the people.
is essential to our daily lives and it’s a quiet, but very powerful
that we tend to take for granted.
Water, water everywhere…
getting it to where it’s needed can be a problem.
truth is that Mueller & Co. MWA is not the company that is
water for drinking or capitalizing on a shift from bottles back to the
tap. Their products and services actually
help get the water to our homes, hydrants and business in addition to
troubleshooting problems that lie beneath the streets.
is one of the largest manufacturers of fire hydrants, butterfly valves
Gate valves in the U.S. and Canada and offers the broadest product line
valves for residential water and gas systems.
product offerings include pipe repair products, water meters, tapping
and tools, advanced metering infrastructure (AMI)/automated meter
and leak detection and pipe condition assessment technology and
sales of Mueller’s products are heavily influenced by local water
specifications, so they know exactly what they need and fill a specific
cities age and grow, the need for replacement and/or improvement of
infrastructure is necessary. Many of
America’s cities are deficient in this area and it’s something they
avoid. In America’s biggest water
systems alone, 30% of pipes are 40 to 80 years old.
from improvements, water leaks alone account for millions in losses for
one of Mueller’s divisions allows water companies to accurately detect
and assesses the condition of water pipes—without breaking ground—
use of their acoustic technology.
Flow & Insider Action
Back in late April, Mueller announced record
earnings of 5 cents per share, beating the Zacks Consensus estimate for
or 150%. The company more than doubled
adjusted operating income to $24.7 million from $11.5 million versus
quarter last year and saw a $31.6 million increase in net sales to
million from $251.5 million.
Margins improved and
Mueller also redeemed
$22.5 million principal amount of 8.75% Senior Unsecured Notes,
debt leverage to 4.0x.
It was their best
quarter since 2008 and shares
responded appropriately, rocketing almost 35% from where they were
before the earnings release.
Even with the rise, I
noticed that several insiders
were still buying shares around the $6.88 mark, or slightly above where
are currently trading; usually a bullish sign.
Analysts have also
gotten more bullish after
the results and have adjusted their target and estimates higher.
Mueller continues to
see shipment volumes of their
valves, hydrants and brass products increasing.
Moreover, net sales of Mueller Co.’s newer technology products and
services more than doubled in the quarter on a year-over-year basis
demonstrating the footing these products and services continue to gain
Share valuations are
certainly rich at 35
times forward earnings, but if Mueller can deliver on their current
that multiple could drop dramatically and make Mueller stock a little
First off, it’s important to realize that
this is a volatile stock. Yesterday’s
8.75%, no news drop is proof of that. Shares tend to
oscillate roughly 4.5% per day
if you are looking to quantify the moves.
The good news is that
the stock remains in a
bullish trend and above the 50 and 200 day moving averages of $6.57 and
Share should see a
decent bounce as they are
well outside of the lower Bollinger band in the over-sold territory and
also hold the 50 day moving average barring any catastrophic broad
In the short term it
wouldn’t be unrealistic to
see the stock back in the $7.75 range and higher.
fundamentals aren’t perfect, MWA is
a Zacks Rank #1 with stable technicals and a cheap absolute share
For more players in
the “water space,” you
can also checkout American
Water Works Co (AWK - Snapshot Report) -
Zacks Rank #3, Consolidated
Water Co (CWCO - Snapshot Report) – Zacks Rank #2
American Sts Water Co (AWR - Snapshot Report) –
Zacks Rank #2.
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