Watts Water Technologies, Inc., one of the world's leading manufacturers and providers of plumbing, heating, and water quality products and solutions, reported record second quarter 2026 results, with net sales of $763.2 million, adjusted diluted earnings per share of $3.66, and diluted EPS of $3.53. Both metrics significantly exceeded analyst expectations, with adjusted EPS beating the consensus estimate of $3.33 by 9.91% and sales surpassing the $725.754 million forecast by 5.16%. Building on this strong first-half performance, the company has raised its full year 2026 sales and margin outlook.

CEO Robert J. Pagano Jr. commented: "We delivered another strong quarter, achieving record sales, operating income and EPS, with double-digit organic growth. These results reflect the strength of our diversified portfolio, disciplined execution, and our ability to capture long-term growth opportunities. Building on our first half performance, we are increasing our full year 2026 sales and margin outlook. While the trade and geopolitical environments remain dynamic, our teams continue to execute well and remain focused on serving our customers."

Second Quarter Financial Performance

The following table summarizes key second quarter financial metrics compared to the prior year period (second quarter 2025):

Sales of $763 million increased 19% on a reported basis and 12% on an organic basis, primarily due to favorable price realization and higher volume driven by data center growth. Acquisition sales within the Americas and APMEA contributed $34 million, or 5%, to reported sales growth, while favorable foreign exchange contributed $7 million, or 1%. Operating and adjusted operating margins declined primarily due to acquisition dilution, inflation, tariffs, and a difficult comparison against a one-time tariff-related price/cost benefit in the prior year, partly offset by favorable price realization, sales volume leverage, and productivity.

Regional Performance

The following table presents second quarter net sales and segment margins by region:

Americas sales growth was driven by favorable price realization and higher data center volumes, with acquisition sales contributing $28 million, or 6%, to reported growth. Segment margin decreased 150 basis points primarily due to acquisition dilution, inflation, and tariffs. Europe sales grew on higher volumes and favorable price realization, with favorable foreign exchange contributing 3% to reported growth; segment margin increased 160 basis points. APMEA saw strong organic growth of 31%, primarily driven by data center growth in China, partly offset by a decline in the Middle East; acquisition sales contributed $6 million, or 17%, and segment margin increased 100 basis points.

Six-Month Results and Cash Flow

For the six months ended June 28, 2026, net sales were $1,440.4 million compared to $1,201.7 million in the prior year period. Net income for the first half was $217.9 million versus $174.9 million. Operating cash flow was $120.8 million and net capital expenditure was $22.6 million, resulting in free cash flow of $98.2 million. In the comparable prior year period, operating cash flow was $124.9 million, net capital expenditure was $19.8 million, and free cash flow was $105.1 million. Free cash flow declined due to higher working capital levels and increased capital expenditures, which more than offset higher net income.

The company repurchased approximately 13,000 shares of Class A common stock at a cost of $4.1 million during the second quarter. Approximately $121 million remains available under the stock repurchase program authorized in 2023, which has no expiration date.

Full Year 2026 Outlook

The company raised its full year 2026 guidance as follows:

The full year outlook assumes no change in the level of impact from the Middle East conflict and incorporates the estimated impact of tariffs in place or announced as of August 4, 2026. The outlook does not include the impact of tariff refunds; any tariff refunds received in future periods will be treated as non-recurring special items and excluded from adjusted results. Sequential increases in free cash flow are expected in the second half of 2026 as the company monetizes working capital with the seasonality of the business.

Watts Water Technologies has raised its fiscal year 2026 sales guidance to a range of $2.780 billion to $2.854 billion, signaling robust demand for its water management solutions. The updated outlook exceeds the company’s previous forecast of $2.631 billion to $2.728 billion and beats the consensus estimate of $2.743 billion. This upward revision reflects strong performance across its product lines and suggests continued momentum in the water treatment sector.

The adjustment indicates that Watts Water Technologies is tracking above analyst expectations for the remainder of the fiscal year. By lifting the midpoint of its guidance significantly, the company is communicating confidence in its operational execution and market positioning. The new upper bound of $2.854 billion represents a notable increase from the prior ceiling of $2.728 billion.

Guidance Revision Details

The following table outlines the changes in Watts Water Technologies’ FY2026 sales outlook compared to the previous guidance and market estimates:

The revision applies to the entire fiscal year 2026 period. The company did not provide specific breakdowns by segment or geography in this update, but the aggregate increase points to broad-based strength.

What the Numbers Show

The widening of the guidance range alongside the upward shift in both the floor and ceiling suggests improved visibility into future orders. The new low end of $2.780 billion now exceeds the previous high end of $2.728 billion, indicating that the company’s baseline expectations have fundamentally improved. This structural shift in the outlook reduces downside risk relative to the prior forecast and aligns more closely with the higher end of analyst projections.