It has been about a month since the last earnings report for Watts Water (WTS Quick QuoteWTS - Free Report) . Shares have added about 7.1% 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 its most recent earnings report in order to get a better handle on the important drivers.

Watts Water Q1 Earnings & Revenues Beat Estimates, Rise Y/Y

Watts Water reported first-quarter 2026 adjusted earnings per share (EPS) of $3.04 compared with $2.37 in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 11.8%.

The company’s quarterly net sales increased 21% year over year to $677.3 million. The top line beat the Zacks Consensus Estimate by 7.2%. Organic sales were up 12% year over year, driven by favorable prices and higher volumes supported by strong growth in the data center market.

Management highlighted that the company delivered a strong start to 2026, supported by organic growth across all regions and record first-quarter net sales, operating income, operating margin and EPS, reflecting disciplined execution and continued focus on delivering value to customers. Watts Water also emphasized that it is actively navigating geopolitical and trade-related uncertainties while continuing to invest in higher-growth opportunities such as data centers and digital solutions.

In addition, management noted that productivity and automation initiatives under the One Watts Performance System are helping drive efficiency and margin performance. Despite the solid start to the year, the company maintained its full-year 2026 outlook given the dynamic macroeconomic environment.

Supported by a strong balance sheet and healthy cash flow generation, management remains focused on disciplined capital allocation and creating sustainable long-term shareholder value.

Q1 Segment Results

Americas: Net sales increased 23% year over year to $515 million on a reported basis and rose 16% organically, primarily driven by favorable pricing and incremental volumes supported by strong data center demand. Acquisitions contributed $31 million in incremental sales, accounting for 7% of reported growth. Segment margin expanded 80 basis points (bps) as benefits from price realization, productivity improvements and volume leverage more than offset the impacts of inflation, tariffs and acquisition-related dilution.

Europe: Net sales increased 12% year over year to $121 million on a reported basis and grew 1% organically. Reported sales growth benefited from favorable foreign exchange, which contributed 11% to reported results. Organic sales growth was primarily driven by favorable pricing, which offset a modest decline in volumes. Segment margin contracted 20 bps as gains from price realization, productivity initiatives and restructuring actions were more than offset by inflationary pressures and volume deleverage.

APMEA: Net sales increased 29% year over year to $41 million on a reported basis and rose 3% organically, driven by growth in China, Australia and New Zealand, partially offset by weakness in the Middle East. Acquisitions contributed $6 million, or 19%, to reported sales growth, while favorable foreign exchange added 7%. Segment margin expanded 120 bps, supported by trade sales volume leverage, productivity gains and acquisition accretion, which more than offset inflation and affiliate volume deleverage.

Other Details

Gross profit increased 19.7% year over year to $326.1 million. Selling, general and administrative expenses rose 15.2% to $192.9 million. Operating income was $133 million, up 51.7% year over year. Adjusted operating income was $135.9 million, up 28.1% year over year.

Operating margin expanded 390 bps to 19.6%. The adjusted operating margin was 20.1%, up 110 bps year over year. Margin performance was driven by favorable pricing, productivity improvements and volume leverage, which more than offset the impacts of inflation, investments, tariffs and acquisition-related dilution. Operating margin also benefited from lower restructuring charges, partially offset by higher acquisition-related expenses.

Cash Flow & Liquidity

For the first quarter ended March 29, 2026, Watts Water generated $17.9 million of cash from operating activities compared with $55.2 million in the prior-year period.

For the first quarter, free cash flow was $6.6 million compared with $45.6 million a year ago.

Free cash flow declined primarily due to higher capital expenditures and elevated working capital levels, which more than offset the benefit of increased net income. The rise in working capital was driven by higher accounts receivable linked to stronger net sales, increased inventory levels resulting from incremental tariffs and strategic inventory investments to support anticipated end-market demand, as well as higher annual customer rebates tied to sales growth and payment timing. Management expects free cash flow to improve sequentially through 2026 as working capital is gradually monetized in line with normal business seasonality.

On May 4, 2026, the company announced a 21% increase in its quarterly dividend, raising the payout from 52 cents per share to 63 cents, effective June 2026.

During the first quarter of 2026, the company also repurchased nearly 13,000 shares for approximately $3.8 million. As of quarter-end, about $125 million remained available under the share repurchase program authorized in 2023, which has no expiration date.

As of March 29, 2026, the company had $374.7 million in cash and cash equivalents with $197.8 million of long-term debt compared with the respective figures of $405.5 million and $197.7 million as of Dec 31, 2025.

Q2 & 2026 Guidance by WTS

For 2026, the company maintained its prior outlook and continues to expect reported sales growth in the range of 8% to 12%, with organic sales growth projected between 2% and 6%.

Watts Water expects adjusted EBITDA margin to be between 21.5% and 22.1%, representing a change of down 40 bps to up 20 bps year over year.

The company anticipates operating margin to be between 18.8% and 19.4%, reflecting an expansion of 40-100 bps, while adjusted operating margin is forecast at 19.1% to 19.7%, implying a decline of 50 bps to an increase of 10 bps.

For the second quarter of 2026, Watts Water expects reported sales growth of 10% to 14% and organic sales growth of 4% to 8%. Adjusted EBITDA margin is projected between 22.3% and 22.9%, while adjusted operating margin is expected in the range of 20% to 20.6%.

How Have Estimates Been Moving Since Then?

Since the earnings release, investors have witnessed a upward trend in fresh estimates.

VGM Scores

Currently, Watts Water has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly 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, Crane (CR Quick QuoteCR - Free Report) , a stock from the same industry, has gained 3.6%. The company reported its results for the quarter ended March 2026 more than a month ago.

Crane reported revenues of $696.4 million in the last reported quarter, representing a year-over-year change of +24.9%. EPS of $1.65 for the same period compares with $1.39 a year ago.

Crane is expected to post earnings of $1.65 per share for the current quarter, representing a year-over-year change of +10.7%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

Crane has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.