Mueller Water Products Q2 2025 slides: Record sales amid tariff challenges

Mueller Water Products (NYSE:MWA) reported record second-quarter performance for fiscal year 2025, with net sales increasing 3.1% year-over-year to $364.3 million. The company raised its full-year sales guidance while outlining strategies to mitigate tariff impacts. The stock closed at $27.04 on May 6, 2025, down 0.85% following the earnings presentation.

Quarterly Performance Highlights

Mueller Water Products achieved new second-quarter records for consolidated net sales, adjusted EBITDA, and adjusted net income per share. Adjusted net income per diluted share increased 13.3% year-over-year to $0.34, while adjusted EBITDA grew 2.8% to $84.5 million.

"We surpassed record net sales in Q2 FY2024, which increased 6.2% year-over-year," the company noted in its presentation, attributing the growth primarily to "higher pricing and increased volumes across most product lines."

As shown in the following consolidated GAAP results chart, while net sales increased, gross profit decreased 1.8% year-over-year to $128 million, resulting in a margin of 35.1%, down 180 basis points from the prior year:

The company significantly reduced selling, general and administrative (SG&A) expenses by 12.6% year-over-year to $55.7 million, helping to drive a 10.1% increase in operating income to $69.9 million. This resulted in an operating margin of 19.2%.

On a non-GAAP basis, adjusted operating income increased 9.6% year-over-year to $73.1 million, with an improved operating margin of 20.1%, up 120 basis points from the prior year:

Segment Performance

The Water Flow Solutions (WFS) segment, which represents approximately 59% of total sales, saw net sales increase 5.1% year-over-year to $216.2 million. This growth was driven by "increased volumes of iron gate and specialty valves and higher pricing across most product lines," though partially offset by "lower volumes of service brass products."

The segment’s adjusted operating income increased 6.3% to $55.9 million, with an operating margin of 25.9%, up 30 basis points year-over-year:

Meanwhile, the Water Management Solutions (WMS) segment reported a modest 0.3% increase in net sales to $148.1 million, primarily due to "increased volumes of repair products and higher pricing across most product lines," offset by "lower volumes of natural gas distribution products."

Despite the minimal sales growth, WMS adjusted operating income grew 8.3% to $31.4 million, with margin expansion of 160 basis points to 21.2%:

Tariff Mitigation Strategies

A significant focus of the presentation was on the company’s approach to mitigating tariff impacts. Mueller Water Products outlined several strategies, including targeted price actions, supply chain initiatives, and operational improvements.

The company is facing tariff challenges across multiple trade flows, including China to U.S. (125%/20%), Israel to U.S. (25%/17%), Rest of World to U.S. (10%), and U.S. to Canada (25%):

With 92% of net sales in the United States and manufacturing facilities across the U.S., China, and Israel, the company is implementing a multi-faceted approach to address these challenges, including "shifting sourcing geographies, implementing supplier cost sharing, and driving productivity at our facilities."

Balance Sheet Strength

Mueller Water Products highlighted its strong financial position, with $121.3 million in net debt and a net debt leverage ratio of 0.4x as of March 31, 2025. The company maintains investment-grade adjacent credit ratings with Moody’s (Ba1, Stable) and S&P (BB, Positive).

Total (EPA:TTEF) liquidity stood at $492.2 million, including $163 million of excess availability under the asset-based lending agreement. The company has no debt maturities prior to June 2029, when its $450 million of 4.0% Senior Notes come due:

Updated FY2025 Outlook

Based on strong first-half performance, Mueller Water Products raised its full-year net sales guidance while maintaining its adjusted EBITDA expectations:

The company now expects fiscal year 2025 net sales to be between $1,390 million and $1,400 million, representing growth of 5.7% to 6.5% year-over-year. Adjusted EBITDA is projected to be between $310 million and $315 million, up 8.9% to 10.6% from the prior year.

Capital expenditures are expected to be between $45 million and $50 million as the company continues "investing in our future growth, operational efficiencies, and domestic facilities." Free cash flow is anticipated to exceed 80% of adjusted net income.

Strategic Priorities

Mueller Water Products outlined four strategic priorities to drive long-term growth and profitability:

1. Improving operational excellence and expanding capabilities

2. Accelerating sales growth through customer experience and innovation

3. Fostering culture through purpose, collaboration, inclusion, and effectiveness

4. Increasing margins and free cash flow to support future investments and growth

The company emphasized its purpose of "Connecting Communities to Water, Life’s Most Essential Resource, with Exceptional People, Solutions and Products," underscoring its position as a leading supplier of infrastructure products and solutions for more than 165 years.

Despite the challenges posed by tariffs and some manufacturing inefficiencies, Mueller Water Products demonstrated resilience in the second quarter with record performance metrics and a positive outlook for the remainder of fiscal year 2025.

Full presentation:

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