We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Watts Raises 2026 Outlook as Data Center Demand Reshapes Its Growth
Read MoreHide Full Article
Key Takeaways
Watts lifted 2026 reported sales growth guidance to 14%-17% as data center demand strengthened.
Data center sales more than tripled in Q2 and made up 8% of Watts' first-half 2026 sales.
Watts raised 2026 capital spending to $60-$65 million to add data center capacity in North America and China.
Watts Water Technologies, Inc. (WTS - Free Report) paired a sizable second-quarter earnings beat with sharply higher data center demand as management lifted its 2026 sales outlook.
Data centers are becoming a larger part of Watts' growth mix. The shift is also raising the relevance of capacity spending, project timing and margin effects to the company's near-term earnings profile.
Watts Q2 Results Beat Expectations
Watts reported adjusted earnings of $3.66 per share, 9.6% above the Zacks Consensus Estimate of $3.34. Sales of $763.2 million beat the consensus mark of $726 million by 5.1%.
Organic sales increased 12.2%, supported by favorable pricing, higher volumes and data center growth. Adjusted operating income rose 15% to $160 million, although adjusted operating margin declined 60 basis points to 21%.
Image Source: Zacks Investment Research
WTS Data Center Sales More Than Triple
Second-quarter data center sales more than tripled year over year and represented 8% of total sales in the first half of 2026. Demand was concentrated in the Americas and the Asia-Pacific, Middle East and Africa region, with Europe emerging as another market.
Watts now expects data centers to account for a mid- to high-single-digit percentage of full-year 2026 sales, up from 3% in 2025. That shift makes cooling demand a more meaningful contributor to companywide growth.
Watts Raises Its 2026 Growth Targets
Management raised expected 2026 reported sales growth to 14%-17% from 8%-12%. Organic growth guidance increased to 8%-11% from 2%-6%, reflecting better data center demand, pricing and regional performance than expected in May.
Adjusted operating margin is now expected at 19.8%-20.4%. Price, volume leverage and productivity are expected to more than offset higher inflation and about 50 basis points of acquisition dilution, keeping profitability central to the stronger sales outlook.
Watts Water Technologies, Inc. Price and Consensus
Watts estimates its served addressable data center market at about $2 billion, with potential content of roughly $25,000-$100,000 per megawatt. Liquid-cooled projects can carry more content, particularly when thermal storage tanks are included.
The company raised 2026 capital spending to $60-$65 million from $50-$60 million, with added capacity in North America and China. Superior Boiler is also being used to expand CoolVault production. Vertiv Holdings Co. (VRT - Free Report) , meanwhile, is expanding data center cooling manufacturing capacity in Europe.
Modine Manufacturing Company (MOD - Free Report) provides another industry reference point. Its data center revenues increased 90% year over year in the quarter ended June 30, 2026, underscoring broad demand for thermal-management capacity.
Watts Must Manage Margin Pressure and Timing
Data center sales create a mixed margin effect. Management said the business causes some gross-margin dilution but remains accretive to operating margin because it carries a relatively low operating expense burden.
Project timing is less predictable than in some of Watts' other markets. Customer-driven pull-forwards helped the second quarter, while tariffs, inflation, acquisition dilution and soft construction activity remain variables that can affect quarterly sales and margins.
WTS Signals a Balanced Near-Term Setup
The near-term setup remains balanced. Data center growth is lifting Watts' sales outlook and capacity needs, but project timing and broader cost pressures still limit a simple read-through from the stronger demand trend.
WTS currently carries a Zacks Rank #3 (Hold), with a VGM Score of F, Value Score of F, Growth Score of D and Momentum Score of C. Those grades sit below the A and B Style Scores Zacks emphasizes most, tempering the positive earnings event without negating the data center progress.
View the Zacks #1 Rank List
Image: Bigstock
Watts Raises 2026 Outlook as Data Center Demand Reshapes Its Growth
Key Takeaways
Watts Water Technologies, Inc. (WTS - Free Report) paired a sizable second-quarter earnings beat with sharply higher data center demand as management lifted its 2026 sales outlook.
Data centers are becoming a larger part of Watts' growth mix. The shift is also raising the relevance of capacity spending, project timing and margin effects to the company's near-term earnings profile.
Watts Q2 Results Beat Expectations
Watts reported adjusted earnings of $3.66 per share, 9.6% above the Zacks Consensus Estimate of $3.34. Sales of $763.2 million beat the consensus mark of $726 million by 5.1%.
Organic sales increased 12.2%, supported by favorable pricing, higher volumes and data center growth. Adjusted operating income rose 15% to $160 million, although adjusted operating margin declined 60 basis points to 21%.
Image Source: Zacks Investment Research
WTS Data Center Sales More Than Triple
Second-quarter data center sales more than tripled year over year and represented 8% of total sales in the first half of 2026. Demand was concentrated in the Americas and the Asia-Pacific, Middle East and Africa region, with Europe emerging as another market.
Watts now expects data centers to account for a mid- to high-single-digit percentage of full-year 2026 sales, up from 3% in 2025. That shift makes cooling demand a more meaningful contributor to companywide growth.
Watts Raises Its 2026 Growth Targets
Management raised expected 2026 reported sales growth to 14%-17% from 8%-12%. Organic growth guidance increased to 8%-11% from 2%-6%, reflecting better data center demand, pricing and regional performance than expected in May.
Adjusted operating margin is now expected at 19.8%-20.4%. Price, volume leverage and productivity are expected to more than offset higher inflation and about 50 basis points of acquisition dilution, keeping profitability central to the stronger sales outlook.
Watts Water Technologies, Inc. Price and Consensus
Watts Water Technologies, Inc. price-consensus-chart | Watts Water Technologies, Inc. Quote
WTS Adds Capacity for Liquid Cooling Demand
Watts estimates its served addressable data center market at about $2 billion, with potential content of roughly $25,000-$100,000 per megawatt. Liquid-cooled projects can carry more content, particularly when thermal storage tanks are included.
The company raised 2026 capital spending to $60-$65 million from $50-$60 million, with added capacity in North America and China. Superior Boiler is also being used to expand CoolVault production. Vertiv Holdings Co. (VRT - Free Report) , meanwhile, is expanding data center cooling manufacturing capacity in Europe.
Modine Manufacturing Company (MOD - Free Report) provides another industry reference point. Its data center revenues increased 90% year over year in the quarter ended June 30, 2026, underscoring broad demand for thermal-management capacity.
Watts Must Manage Margin Pressure and Timing
Data center sales create a mixed margin effect. Management said the business causes some gross-margin dilution but remains accretive to operating margin because it carries a relatively low operating expense burden.
Project timing is less predictable than in some of Watts' other markets. Customer-driven pull-forwards helped the second quarter, while tariffs, inflation, acquisition dilution and soft construction activity remain variables that can affect quarterly sales and margins.
WTS Signals a Balanced Near-Term Setup
The near-term setup remains balanced. Data center growth is lifting Watts' sales outlook and capacity needs, but project timing and broader cost pressures still limit a simple read-through from the stronger demand trend.
WTS currently carries a Zacks Rank #3 (Hold), with a VGM Score of F, Value Score of F, Growth Score of D and Momentum Score of C. Those grades sit below the A and B Style Scores Zacks emphasizes most, tempering the positive earnings event without negating the data center progress.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.