A month has gone by since the last earnings report for Watts Water (WTS Quick QuoteWTS - Free Report) . Shares have added about 3.9% in that time frame, outperforming the S&P 500.

But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Watts Water due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Watts Water's Q3 Earnings Surpass Estimates

Watts Water reported third-quarter 2025 adjusted earnings per share (EPS) of $2.50 compared with $2.03 in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 9.2%.

The company’s quarterly net sales increased 13% year over year to $611.7 million. The top line beat the Zacks Consensus Estimate by 5.9%. Organic sales were up 9% year over year due to favorable prices, volume and pull-forward demand.

In the third quarter, the company acquired Haws Corporation, a leading provider of emergency safety and hydration solutions. Management stated that the addition of Haws’ innovative, specified products enhances the company’s ability to deliver broader capabilities and solutions to customers. Also, integration and synergy efforts across Bradley, Josam, I-CON and EasyWater are progressing ahead of expectations.

The company delivered a strong third quarter, driven by solid execution in the Americas, which more than offset softness in Europe. The company’s global supply chain strategy and targeted pricing actions helped mitigate tariff-related cost pressures. Based on better-than-expected performance and its fourth-quarter outlook, the company raised full-year 2025 sales and margin guidance.

Segment Results

Americas: Net sales were up 1% on a reported basis to $464 million, while organic sales jumped 13%. The I-CON and EasyWater acquisitions added $11 million in incremental sales, accounting for 3% of reported growth. Adjusted operating margin expanded 180 basis points (bps) to 23.7%, supported by favorable price realization, volume leverage, productivity gains and cost actions, which more than offset the effects of inflation, investments and tariffs.

Europe: Net sales were up 4% year over year to $112 million on a reported basis and decreased 2% on an organic basis. Sales growth was driven by favorable foreign exchange, which boosted reported sales by 6%. Organic sales declined as lower volumes in drains and ongoing market weakness outweighed pricing gains. Adjusted operating margin increased 160 bps to 12.2%, driven by improved pricing, productivity initiatives and restructuring benefits, which more than offset volume deleverage and inflation.

APMEA: Net sales decreased 1% to $36 million and were flat organically. Sales declined due to unfavorable foreign exchange, which lowered reported results by 1%. Organic sales were unchanged, with growth in Australia and the Middle East offset by softness in China and New Zealand.
Adjusted operating margin increased 90 bps to 19.4%, driven by the positive impact of productivity improvements and sales mix, which more than offset inflation.

Other Details

Gross profit increased 16.1% year over year to $298.4 million. Selling, general and administrative expenses rose 16.4% to $298.4 million. Operating income was $111.4 million, up 19.5% year over year. Adjusted operating income was $113.3 million, up 22.1% year over year.

Operating margin expanded 110 bps to 18.2%. The adjusted operating margin was 18.5%, up 140 bps year over year. Margin performance was driven by favorable pricing, volume leverage in the Americas, productivity gains and cost actions, which more than offset volume deleverage in Europe, inflation and tariff impacts.

Cash Flow & Liquidity

For the nine months ended Sept. 28, 2025, Watts Water generated $247.3 million of cash from operating activities compared with $221.6 million in the prior-year period.

For the nine months, free cash flow was $216 million compared with $204.2 million a year ago. Operating and free cash flow rose on higher net income and lower taxes from the One Big Beautiful Bill Act, partly offset by higher working capital and inventory costs tied to tariffs. Increased capital spending versus prior-year property sale proceeds also weighed on free cash flow. However, normal fourth-quarter seasonality is expected to drive strong operating and free cash flow.

During the third quarter of 2025, the company repurchased about 15,000 shares for $3.9 million. In the first nine months of 2025, total buybacks reached roughly 51,000 shares for $11.8 million. The company still has approximately $133 million remaining under its 2023 stock repurchase authorization, which has no expiration date.

As of Sept. 28, 2025, the company had $457.7 million in cash and cash equivalents with $197.5 million of long-term debt compared with the respective figures of $369.3 million and $197.3 million as of June 29, 2025.

Guidance

For 2025, the company raised its outlook for sales, organic growth and margins. Reported sales are now expected to rise 7%–8% (previous guided range was between 2% and 5%), with organic sales up 4%–5% (previous guided range was from flat to an increase of 3%).

Adjusted EBITDA margin is now forecasted to be between 21.5% and 21.6%, indicating an improvement of 140 bps to 150 bps. The company had projected earlier adjusted EBITDA margin guidance to be between 20.7% and 21.3%, indicating an improvement of 60 bps to 120 bps.

Adjusted operating margin is expected at 19.1%–19.2%, up 140–150 basis points. The company had previously guided adjusted operating margin to be between 18.2% and 18.8%, implying a 50-110 bps improvement year over year.

For the fourth quarter of 2025, the company expects the adjusted operating margin to be between 17% and 17.5%, implying growth of 20-70 bps year over year. Reported sales are expected to record an increase of 9-13% and organic sales are expected to rise 4-8%. Adjusted EBITDA margin is forecasted to be 19.6% to 20.1%, indicating an improvement of 30 bps to 80 bps.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a upward trend in fresh estimates.

The consensus estimate has shifted 13.56% due to these changes.

VGM Scores

Currently, Watts Water has a average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for value investors.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Watts Water has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Watts Water is part of the Zacks Manufacturing - General Industrial industry. Over the past month, Ingersoll Rand (IR Quick QuoteIR - Free Report) , a stock from the same industry, has gained 3%. The company reported its results for the quarter ended September 2025 more than a month ago.

Ingersoll reported revenues of $1.96 billion in the last reported quarter, representing a year-over-year change of +5.1%. EPS of $0.86 for the same period compares with $0.84 a year ago.

Ingersoll is expected to post earnings of $0.91 per share for the current quarter, representing a year-over-year change of +8.3%. Over the last 30 days, the Zacks Consensus Estimate has changed -1.4%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Ingersoll. Also, the stock has a VGM Score of F.