Looking back on water infrastructure stocks’ Q3 earnings, we examine this quarter’s best and worst performers, including Xylem (NYSE:XYL) and its peers.
Trends towards conservation and reducing groundwater depletion are putting water infrastructure and treatment products front and center. Companies that can innovate and create solutions–especially automated or connected solutions–to address these thematic trends will create incremental demand and speed up replacement cycles. On the other hand, water infrastructure and treatment companies are at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.
The 5 water infrastructure stocks we track reported a very strong Q3. As a group, revenues beat analysts’ consensus estimates by 3.8%.
Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 9.5% since the latest earnings results.
Xylem (NYSE:XYL)
Formed through a spinoff, Xylem (NYSE:XYL) manufactures and services engineered products across a wide variety of applications primarily in the water sector.
Xylem reported revenues of $2.27 billion, up 7.8% year on year. This print exceeded analysts’ expectations by 1.9%. Overall, it was an exceptional quarter for the company with an impressive beat of analysts’ EBITDA estimates and a solid beat of analysts’ adjusted operating income estimates.
“The team delivered another strong quarter, exceeding expectations with disciplined execution on continuing commercial momentum,” said Matthew Pine, Xylem’s president and CEO.
Unsurprisingly, the stock is down 6.1% since reporting and currently trades at $140.34.
Best Q3: Watts Water Technologies (NYSE:WTS)
Founded in 1874, Watts Water (NYSE:WTS) specializes in manufacturing water products and systems for residential, commercial, and industrial applications globally.
Watts Water Technologies reported revenues of $611.7 million, up 12.5% year on year, outperforming analysts’ expectations by 6.2%. The business had a stunning quarter with a solid beat of analysts’ organic revenue estimates and an impressive beat of analysts’ EBITDA estimates.
Watts Water Technologies scored the fastest revenue growth among its peers. Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 4.8% since reporting. It currently trades at $268.63.
Is now the time to buy Watts Water Technologies? Access our full analysis of the earnings results here, it’s free for active Edge members.
Weakest Q3: Tennant (NYSE:TNC)
As the world’s largest manufacturer of autonomous mobile robots, Tennant (NYSE:TNC) designs, manufactures, and sells cleaning products to various sectors.
Tennant reported revenues of $303.3 million, down 4% year on year, falling short of analysts’ expectations by 0.9%. It was a slower quarter as it posted a significant miss of analysts’ EPS estimates and a slight miss of analysts’ revenue estimates.
Tennant delivered the highest full-year guidance raise but had the weakest performance against analyst estimates in the group. As expected, the stock is down 13.1% since the results and currently trades at $69.19.
Read our full analysis of Tennant’s results here.
Mueller Water Products (NYSE:MWA)
As one of the oldest companies in the water infrastructure industry, Mueller (NYSE:MWA) is a provider of water infrastructure products and flow control systems for various sectors.
Mueller Water Products reported revenues of $380.8 million, up 9.4% year on year. This print surpassed analysts’ expectations by 5.2%. It was a very strong quarter as it also logged a solid beat of analysts’ organic revenue estimates and an impressive beat of analysts’ revenue estimates.
Mueller Water Products had the weakest full-year guidance update among its peers. The stock is down 7.4% since reporting and currently trades at $23.18.
Read our full, actionable report on Mueller Water Products here, it’s free for active Edge members.
Energy Recovery (NASDAQ:ERII)
Having saved far more than a trillion gallons of water, Energy Recovery (NASDAQ:ERII) provides energy recovery devices to the water treatment, oil and gas, and chemical processing sectors.
Energy Recovery reported revenues of $32 million, down 17.1% year on year. This result topped analysts’ expectations by 6.9%. Overall, it was a strong quarter as it also recorded an impressive beat of analysts’ revenue estimates and a beat of analysts’ EPS estimates.
Energy Recovery scored the biggest analyst estimates beat but had the slowest revenue growth among its peers. The stock is down 16.3% since reporting and currently trades at $14.45.
Read our full, actionable report on Energy Recovery here, it’s free for active Edge members.
Market Update
The Fed’s interest rate hikes throughout 2022 and 2023 have successfully cooled post-pandemic inflation, bringing it closer to the 2% target. Inflationary pressures have eased without tipping the economy into a recession, suggesting a soft landing. This stability, paired with recent rate cuts (0.5% in September 2024 and 0.25% in November 2024), fueled a strong year for the stock market in 2024. The markets surged further after Donald Trump’s presidential victory in November, with major indices reaching record highs in the days following the election. Still, questions remain about the direction of economic policy, as potential tariffs and corporate tax changes add uncertainty for 2025.
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