Watts Water Technologies (NYSE:WTS) Reports Bullish Q1 CY2026

Water management manufacturer Watts Water (NYSE:WTS) reported Q1 CY2026 results beating Wall Street’s revenue expectations, with sales up 21.4% year on year to $677.3 million. Its non-GAAP profit of $3.04 per share was 13% above analysts’ consensus estimates.

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Company Overview

Founded in 1874, Watts Water (NYSE:WTS) specializes in manufacturing water products and systems for residential, commercial, and industrial applications globally.

Revenue Growth

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Watts Water Technologies grew its sales at an impressive 10.7% compounded annual growth rate. Its growth surpassed the average industrials company and shows its offerings resonate with customers, a great starting point for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Watts Water Technologies’s annualized revenue growth of 8.9% over the last two years is below its five-year trend, but we still think the results were respectable.

We can better understand the company’s sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Watts Water Technologies’s organic revenue averaged 3% year-on-year growth. Because this number is lower than its two-year revenue growth, we can see that some mixture of acquisitions and foreign exchange rates boosted its headline results.

This quarter, Watts Water Technologies reported robust year-on-year revenue growth of 21.4%, and its $677.3 million of revenue topped Wall Street estimates by 6.2%.

Looking ahead, sell-side analysts expect revenue to grow 6.6% over the next 12 months, a slight deceleration versus the last two years. This projection doesn't excite us and implies its products and services will see some demand headwinds. At least the company is tracking well in other measures of financial health.

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Operating Margin

Watts Water Technologies has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 16.8%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, Watts Water Technologies’s operating margin rose by 5.8 percentage points over the last five years, as its sales growth gave it immense operating leverage.

This quarter, Watts Water Technologies generated an operating margin profit margin of 19.6%, up 3.9 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Watts Water Technologies’s EPS grew at 21.9% compounded annual growth rate over the last five years, higher than its 10.7% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Watts Water Technologies’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, Watts Water Technologies’s operating margin expanded by 5.8 percentage points over the last five years. On top of that, its share count shrank by 1.2%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Watts Water Technologies, its two-year annual EPS growth of 13.8% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q1, Watts Water Technologies reported adjusted EPS of $3.04, up from $2.37 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Watts Water Technologies’s full-year EPS of $11.25 to grow 6.2%.

Key Takeaways from Watts Water Technologies’s Q1 Results

We were impressed by how significantly Watts Water Technologies blew past analysts’ organic revenue expectations this quarter. We were also excited its adjusted operating income outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this quarter featured some important positives. The stock remained flat at $291.82 immediately following the results.

Is Watts Water Technologies an attractive investment opportunity at the current price? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here (it’s free).