Earnings Recap — Q3 FY2026
CY Q3 2026 · Reported August 5, 2026 · Beat 5 of last 7 quarters
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Mueller's results show continued strength in municipal water infrastructure spending, which is a critical component of the broader infrastructure buildout, though the company has no direct AI exposure. The company's specialty valve growth, including industrial water applications for data centers, suggests indirect demand from AI infrastructure development, as data centers require significant water for cooling and fire protection. However, the company's exposure to this vertical remains small, and the primary driver remains municipal repair and replacement.
Mueller delivered record Q3 results with net sales up 4.1% to $395.9M, adjusted EBITDA up 24.3% to $107.4M (27.1% margin), and adjusted EPS up 47.1% to $0.50. The WMS segment grew 10.3% with record 28.1% margins, while WFS declined slightly but expanded margins to a record 34.1%. The company completed the exit of the i2O pressure monitoring business outside North America, incurring $3.1M in portfolio optimization costs and $11.2M in strategic reorganization charges, along with a one-time tax benefit. Tariff refunds (IEEPA) provided a 150 bps gross margin benefit in the quarter, partially offsetting elevated Section 232 tariffs. Free cash flow for the first nine months was $110.6M, with $495M cash and $453M debt on the balance sheet.
Management raised fiscal 2026 adjusted EBITDA guidance for the third consecutive quarter to a range of $367M to $372M (midpoint margin of 25.1%, another annual record). They narrowed net sales growth guidance to 2.8% to 3.5% YoY, reflecting softer new residential construction and lapping tariff-related price actions. They expect municipal repair and replacement activity to remain resilient and specialty valves to continue strong growth. They lowered SG&A guidance to $241M to $245M and effective tax rate to 21% to 23%. Capex guidance of $60M to $65M was reaffirmed, with free cash flow conversion expected to exceed 70% of adjusted net income. Management remains confident in pricing power to offset inflation and tariffs, and expects the residential slowdown to be offset by municipal and specialty valve strength.
“We achieved quarterly records for net sales, adjusted EBITDA and adjusted net income per diluted share.”
on Record quarterly performance
“We have very strong brands and very good pricing power. So we feel comfortable whatever inflation or tariff impacts we may see, we have the pricing ability to offset that cost.”
on Pricing power
“Residential construction cannot stay depressed forever. There is a pent-up demand of housing, and we know that they will bounce back, and we will -- that will be a tailwind for us as well when that bounce back comes.”
on Residential demand outlook
Updated guidance implies top line down slightly year-on-year against a pretty healthy stacked comp and I think about 1% EBITDA growth, again against solid Q4 '25 performance. How should we think about segment contribution to that?
Paul McAndrew noted the narrowed net sales range reflects slower residential construction and lapping tariff price actions from Q4 last year. Melissa Rasmussen detailed that WFS adjusted EBITDA is expected to be above prior year but decline sequentially due to seasonality and lower short-cycle volumes, with a shift toward specialty valves. WMS margins are expected to be lower sequentially and YoY due to normalized hydrant backlog, residential slowdown, lapping tariff pricing, higher Section 232 tariffs on Krausz, and no further tariff refunds.
I wanted to ask about the specialty valves. You called those out a couple of times because of projects, and it sounds like the demand was strong. I wonder if you could provide some more detail about the demand levels in the third quarter and what the visibility is like in the fourth quarter?
Paul McAndrew said specialty valves have a longer sales cycle and make up the majority of backlog, and have been the fastest-growing category. He noted investments in Kimball consolidation and engineering, and highlighted industrial water as a fast-growing category, including for data centers, with traction in getting on approved manufacturers lists.
Maybe just following up on the data center question. Could you size how big that business is for you today?
Paul McAndrew said the data center business is relatively small overall, but industrial water within specialty valves is seeing the fastest growth and is a high commercial initiative. He also addressed the federal funding sunset, noting federal investment is less than 5% of total municipal investment and that no meaningful change is expected over the next 1-3 years as funds are already appropriated.