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Water infrastructure products manufacturer Mueller Water Products reported Q2 CY2024 results beating Wall Street analysts' expectations, with revenue up 9.2% year on year to $356.7 million. It made a non-GAAP profit of $0.32 per share, improving from its profit of $0.18 per share in the same quarter last year.
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Mueller Water Products (MWA) Q2 CY2024 Highlights:
- Revenue: $356.7 million vs analyst estimates of $329.7 million (8.2% beat)
- EPS (non-GAAP): $0.32 vs analyst estimates of $0.22 (44.4% beat)
- Gross Margin (GAAP): 36.8%, up from 30.6% in the same quarter last year
- Adjusted EBITDA Margin: 23.9%, up from 16.7% in the same quarter last year
- Free Cash Flow of $87.3 million is up from -$15.8 million in the previous quarter
- Market Capitalization: $3.06 billion
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.
Water InfrastructureTrends 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.
Sales GrowthA company's long-term performance is an indicator of its overall business quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for multiple years. Over the last five years, Mueller Water Products grew its sales at a weak 5.8% compounded annual growth rate. This shows it failed to expand in any major way and is a rough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Mueller Water Products's recent history shows its demand slowed as its annualized revenue growth of 2.3% over the last two years is below its five-year trend.
This quarter, Mueller Water Products reported solid year-on-year revenue growth of 9.2%, and its $356.7 million of revenue outperformed Wall Street's estimates by 8.2%. Looking ahead, Wall Street expects sales to grow 3.4% over the next 12 months, a deceleration from this quarter.
Operating MarginOperating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses–everything from the cost of goods sold to advertising and wages. It's also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Mueller Water Products has managed its expenses well over the last five years. It demonstrated solid profitability for an industrials business, producing an average operating margin of 11.7%.
Analyzing the trend in its profitability, Mueller Water Products's annual operating margin rose by 2.1 percentage points over the last five years, showing its efficiency has improved.
In Q2, Mueller Water Products generated an operating profit margin of 18.8%, up 7.9 percentage points year on year. This increase was solid, and since the company's operating margin rose more than its gross margin, we can infer it was recently more efficient with expenses such as sales, marketing, R&D, and administrative overhead.
EPSWe track the long-term growth in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company's growth was profitable.
Mueller Water Products's EPS grew at a decent 9.3% compounded annual growth rate over the last five years, higher than its 5.8% annualized revenue growth. This tells us the company became more profitable as it expanded.
Diving into Mueller Water Products's quality of earnings can give us a better understanding of its performance. As we mentioned earlier, Mueller Water Products's operating margin expanded by 2.1 percentage points over the last five years. On top of that, its share count shrank by 1.3%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.
Like with revenue, we also analyze EPS over a more recent period because it can give insight into an emerging theme or development for the business. For Mueller Water Products, its two-year annual EPS growth of 24.2% was higher than its five-year trend. This acceleration made it one of the faster-growing industrials companies in recent history.
In Q2, Mueller Water Products reported EPS at $0.32, up from $0.18 in the same quarter last year. This print easily cleared analysts' estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Mueller Water Products to perform poorly. Analysts are projecting its EPS of $0.93 in the last year to shrink by 5.2% to $0.88.
Key Takeaways from Mueller Water Products's Q2 ResultsWe were impressed by how significantly Mueller Water Products blew past analysts' EPS expectations this quarter. We were also excited its revenue outperformed Wall Street's estimates. Zooming out, we think this was a fantastic quarter that should have shareholders cheering. The stock traded up 6.8% to $20.24 immediately following the results.
