Mueller Water Products Targets 26.3% FY2027 EBITDA Margin

Mueller Water Products (NYSE: MWA) reported record fiscal 2026 results and projected further adjusted EBITDA margin expansion in fiscal 2027, supported by pricing, manufacturing improvements and the planned transition of its metering business to ZENNER USA. The company expects fiscal 2027 adjusted EBITDA of $378 million to $388 million on net sales of $1.44 billion to $1.47 billion.

At the midpoint of that outlook, adjusted EBITDA margin would reach 26.3%, an increase of 110 basis points from fiscal 2026. Excluding an approximately $6 million tariff-refund benefit recorded in fiscal 2026, Mueller expects margin expansion of 150 basis points. The company said the improvement would be driven by portfolio optimization, higher pricing, manufacturing performance and selling, general and administrative expense productivity, partly offset by inflation, lower volumes and product mix.

Fiscal 2026 sales and earnings rise

For the year ended Sept. 30, Mueller’s net sales increased 3.2% to $1.475 billion, reflecting higher pricing that was partly offset by lower volumes. Adjusted EBITDA rose 14.1% to $372.2 million, while adjusted EBITDA margin expanded 240 basis points to 25.2%.

GAAP net income increased to $221.9 million, or $1.41 per diluted share, from $191.7 million, or $1.22 per share, in fiscal 2025. Adjusted net income per diluted share rose 19.8% to $1.57.

Fourth-quarter sales declined 1.1% to $376.5 million as lower volumes more than offset higher pricing across most product lines. Gross profit was $139.3 million, down 0.5%, while gross margin increased 20 basis points to 37.0%. Excluding one-time items, the company said gross margin declined 100 basis points because of lower volumes, product mix and inflationary pressures, including higher Section 232 tariffs, partly offset by pricing and manufacturing performance.

Quarterly adjusted EBITDA increased 4.0% to $95.5 million, and the adjusted EBITDA margin rose 130 basis points to 25.4%. Higher pricing, lower SG&A expenses and manufacturing performance outweighed inflation, tariffs and lower volumes. Adjusted earnings were unchanged at $0.38 per diluted share. GAAP net income was $52.3 million, or $0.33 per diluted share, compared with $52.6 million, or $0.33 per share, a year earlier.

Segment margins move in opposite directions

Water Flow Solutions fourth-quarter sales fell 3.0% to $210.9 million, reflecting lower iron gate valve and service brass volumes. Higher pricing and increased specialty-valve volumes provided a partial offset. The segment’s adjusted EBITDA rose 7.0% to $67.1 million, and its margin expanded 300 basis points to 31.8%, supported by manufacturing performance, pricing and lower SG&A expenses.

Water Management Solutions sales increased 1.4% to $165.6 million. Pricing and higher repair and natural-gas distribution product volumes offset lower applications and hydrant volumes. Adjusted EBITDA declined 8.4% to $41.2 million, with the margin contracting 270 basis points to 24.9% because of lower volumes, tariffs and inflationary pressures. Higher pricing, lower SG&A expenses and reduced foreign-exchange headwinds partially mitigated those pressures.

Metering transition to reshape portfolio

Mueller plans to transition the Mueller Systems metering business to ZENNER USA following a strategic review. The process is beginning immediately, with the company prioritizing service continuity and existing customer commitments.

Management expects the action to concentrate resources on businesses with stronger competitive positions and profitable growth opportunities. The transition is expected to provide an annualized adjusted EBITDA margin benefit of 100 to 140 basis points, primarily beginning in the second quarter of fiscal 2027.

Fiscal 2027 guidance excludes all metering-related financial results. The business generated approximately $40 million of sales in fiscal 2026. Excluding the portfolio optimization headwind, Mueller expects fiscal 2027 net sales growth of about zero to 2.5%.

The company assumes flat volumes at the midpoint of its outlook after excluding the effect of the prior-year hydrant backlog benefit in Water Management Solutions. Double-digit specialty-valve growth and commercial initiatives are expected to be offset by slower new residential activity and cautious municipal purchasing for repair and replacement work. Price realization is expected to provide a low-single-digit to mid-single-digit benefit, including carryover pricing and new increases that had not been announced at the time of the presentation.

Mueller expects second-half sales and adjusted EBITDA margin to exceed first-half levels because of seasonality and the timing of portfolio and operational benefits. First-quarter margin is expected to be lower than in the second quarter.

Cash flow supports capital returns and investment

Fiscal 2026 free cash flow increased 20.5% to $207.3 million, equal to 84.2% of adjusted net income. Net cash from operating activities rose 19.9% to $262.9 million, primarily because of higher net income and lower cash taxes, partly offset by working-capital changes. Capital expenditures increased 17.5% to $55.6 million, mainly reflecting continued investment in the company’s iron foundries.

Mueller returned $74 million to shareholders through dividends and share repurchases during the year. It also announced a $300 million increase in its repurchase authorization and raised its quarterly dividend 14.3% to $0.08 per share.

As of Sept. 30, the company had $566.0 million in cash, $453.8 million in total debt and $730.7 million of liquidity. Mueller expects fiscal 2027 capital expenditures of $60 million to $70 million and free cash flow above 80% of adjusted net income.

The outlook remains subject to risks including tariff and trade-policy changes, inflation, supply-chain disruption, municipal and residential demand, execution of the metering transition and other portfolio actions, manufacturing performance, workforce constraints, cybersecurity incidents, foreign-exchange movements and the company’s ability to realize benefits from its capital investments and operational initiatives.