Mueller Water Products (NYSE:MWA) executives said the company opened fiscal 2026 with record first-quarter results, driven by pricing and manufacturing efficiencies that more than offset higher tariffs and inflationary pressures. Management also raised its full-year outlook, citing strong first-quarter execution and expectations that municipal repair and replacement activity and specialty valve project work will outweigh a slowdown in residential construction.
Leadership transition and “early stages” of transformation
Chief Executive Officer Martie Zakas said the quarter marked her final week as Mueller’s CEO, calling her tenure “the highlight of my career.” She said she has confidence in President and COO Paul McAndrew and the broader leadership team to build on the company’s momentum. McAndrew said Zakas will remain involved as a senior advisor through the end of the year.
First-quarter performance: pricing, efficiencies, and records
McAndrew said first-quarter net sales grew 4.6% year over year, supported by resilient end markets and a customer-service focus. He added that manufacturing efficiencies “more than offset” the impact of higher tariffs and inflationary pressures, contributing to gross margin expansion and expected benefits tied to the transition to a new brass foundry. Management said the quarter produced first-quarter records for net sales, gross margin, adjusted EBITDA, and adjusted EBITDA margin.
Chief Financial Officer Melissa Rasmussen reported consolidated net sales rose 4.6% to $318.2 million, driven primarily by higher pricing across most product lines and partially offset by slightly lower volumes. She said gross profit increased 16.3% to $119.8 million, and gross margin expanded 380 basis points to 37.6%. Rasmussen attributed the improvement to higher pricing and manufacturing efficiencies, as well as the absence of prior-year inventory and other asset write-downs at WFS that did not recur, partially offset by higher tariffs and ongoing inflationary pressures.
SG&A expenses were $59.8 million, up $5.9 million year over year, reflecting higher personnel costs, inflation, and unfavorable foreign currency impacts. Operating income increased 19.6% to $56.7 million, and included $3.3 million of strategic reorganization and other charges, which were excluded from adjusted results.
On a non-GAAP basis, adjusted operating income increased 14.5% to $60.0 million, and adjusted operating margin expanded 170 basis points to 18.9%. Adjusted EBITDA rose 13.5% to a first-quarter record of $72.1 million, with adjusted EBITDA margin expanding 180 basis points to a record 22.7%. Adjusted diluted EPS increased 16% to a first-quarter record of $0.29.
Segment results: WFS margin strength, WMS headwinds
Rasmussen detailed mixed segment performance, with Water Flow Solutions (WFS) delivering strong profit expansion while Water Management Solutions (WMS) faced tariff and operational pressures.
- WFS: Net sales decreased 0.9% to $173.0 million, reflecting lower volumes of service brass products, partially offset by higher pricing and increased specialty valve volumes. Adjusted operating income increased 28% to $49.4 million. Adjusted EBITDA rose 26.4% to $56.5 million, and adjusted EBITDA margin expanded 710 basis points to 32.7%, which management said was a quarterly record for the segment.
- WMS: Net sales increased 12% to $145.2 million, driven by higher pricing and strong hydrant volume growth, partially offset by lower volumes for natural gas distribution and repair products. Adjusted operating income declined 11.2% to $24.5 million, reflecting increased tariffs, manufacturing inefficiencies, higher SG&A, inflationary pressures, and unfavorable foreign currency. Adjusted EBITDA decreased 9.5% to $29.5 million, and adjusted EBITDA margin contracted 480 basis points to 20.3%.
In response to a question about WFS margin drivers, management emphasized the benefits from the closure of a legacy brass foundry. Executives said those manufacturing efficiency benefits were the largest factor and were expected to continue through the second quarter.
Cash flow, balance sheet, and capital allocation
Mueller generated $61.2 million of operating cash flow in the quarter, up $7.1 million from the prior-year period, driven primarily by higher net income and non-cash adjustments. Capital expenditures increased to $17.2 million from $11.9 million, which Rasmussen said reflected continued investments in iron foundries. Free cash flow was $44.0 million, representing 96% of adjusted net income.
Management said it maintained a balanced approach to capital allocation, investing about $17 million in capex while returning roughly $16 million to shareholders through dividends and share repurchases. The company ended the quarter with $452 million of total debt and $460 million of cash and cash equivalents. Rasmussen noted there are no debt maturities until June 2029 and cited $450 million of senior notes at a 4% fixed interest rate. The company reported total liquidity of $623 million, including $164 million of availability under its ABL, with no borrowings outstanding.
On acquisitions, McAndrew said M&A has become “more of a priority,” with the company evaluating opportunities focused on drinking water, wastewater, and infrastructure exposure where it can drive synergies through operations and commercial teams.
Raised fiscal 2026 guidance; pricing actions and tariff impact
Rasmussen said Mueller raised its full-year fiscal 2026 guidance, increasing the midpoint of the net sales outlook by $20 million and the midpoint of adjusted EBITDA by $10 million. The company now expects:
- Net sales growth: 2.8% to 4.2% year over year
- Adjusted EBITDA: $355 million to $360 million
- Capital expenditures: $60 million to $65 million (reaffirmed)
- Free cash flow: to exceed 85% of adjusted net income (reaffirmed)
At the midpoint, management said the updated adjusted EBITDA range implies an adjusted EBITDA margin of more than 24%, an improvement of more than 100 basis points year over year. Rasmussen also said the company expects second-half adjusted EBITDA margin to exceed the first half, largely due to seasonal net sales patterns, and that the benefits from recently announced price actions should begin phasing in over the coming months, supporting second-half gross margins.
In Q&A, executives said the uplift in sales growth embedded in the updated guidance was “predominantly price-related.” Rasmussen added that the company expects to be price-cost positive for the full year. She said Mueller typically sees low single-digit inflation, but that inflation has more than doubled since tariffs went into effect last year. The company has incorporated an approximate 3% tariff impact into its guidance, she said.
Management reiterated its end-market assumptions, including an expected high single-digit decline in residential construction. That is expected to be offset by low- to mid-single-digit municipal repair and replacement growth and mid- to high-single-digit growth in project-related specialty valve work.
In closing remarks, McAndrew said the company is “excited” about the start to the year and believes it can build on momentum to accelerate net sales growth and expand margins further, while continuing to manage tariff and inflation pressures.
About Mueller Water Products (NYSE:MWA)
Mueller Water Products, Inc is a leading provider of water infrastructure and flow control products and services designed to help water utilities and municipalities manage, control and measure their water distribution systems. The company’s portfolio includes a comprehensive range of products such as fire hydrants, valves, pipe repair systems, fittings and couplings, along with advanced metering and monitoring solutions. By combining traditional mechanical components with digital technologies, Mueller Water Products addresses the critical need for reliable and sustainable water distribution across North America.
The company’s operations are organized around two primary business segments.
