Watts Water (WTS) Hits Record Sales While Margins Quietly Slip

Watts Water Technologies (WTS) reported a 19% increase in net sales to $763 million in the second quarter of 2026, driven primarily by demand for data center solutions. Diluted earnings per share rose to $3.53, up 17% year-over-year, while adjusted diluted EPS climbed to $3.66, up 18%. The company's full-year 2026 outlook was raised due to the strong performance.

However, profitability showed a different picture, with operating margin falling by 80 basis points to 20.2% and adjusted operating margin slipping by 60 basis points to 21.0%. Data center growth, particularly in China, contributed significantly to sales growth in the Americas, Europe, and APMEA regions. Despite the margin erosion, the market appears confident in the company's growth story, as evidenced by the increased hedge fund ownership and a forward P/E ratio of 25.25.