Wrapping up Q2 earnings, we look at the numbers and key takeaways for the water infrastructure stocks, including Energy Recovery (NASDAQ:ERII) 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 Q2. As a group, revenues beat analysts’ consensus estimates by 4.1%.
Luckily, water infrastructure stocks have performed well with share prices up 10.2% on average since the latest earnings results.
Best Q2: 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 $28.05 million, up 3.1% year on year. This print exceeded analysts’ expectations by 10.3%. Overall, it was an incredible quarter for the company with a beat of analysts’ EPS estimates and an impressive beat of analysts’ EBITDA estimates.
Energy Recovery pulled off the biggest analyst estimates beat of the whole group. Unsurprisingly, the stock is up 26.1% since reporting and currently trades at $17.16.
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 $643.7 million, up 7.8% year on year, outperforming analysts’ expectations by 5%. The business had a stunning quarter with an impressive beat of analysts’ organic revenue estimates and a solid beat of analysts’ EBITDA estimates.
Watts Water Technologies pulled off the fastest revenue growth among its peers. The market seems happy with the results as the stock is up 6% since reporting. It currently trades at $280.19.
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 Q2: 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 $318.6 million, down 3.7% year on year, falling short of analysts’ expectations by 2.6%. It was a softer quarter as it posted a significant miss of analysts’ revenue and EPS estimates.
Tennant delivered the weakest performance against analyst estimates, slowest revenue growth, and weakest full-year guidance update in the group. As expected, the stock is down 1.4% since the results and currently trades at $81.41.
Read our full analysis of Tennant’s results here.
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 $2.30 billion, up 6.1% year on year. This result beat analysts’ expectations by 4.2%. Overall, it was a stunning quarter as it also produced an impressive beat of analysts’ organic revenue estimates and a solid beat of analysts’ EBITDA estimates.
Xylem achieved the highest full-year guidance raise among its peers. The stock is up 12.6% since reporting and currently trades at $147.19.
Read our full, actionable report on Xylem here, it’s free for active Edge members.
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 $380.3 million, up 6.6% year on year. This print surpassed analysts’ expectations by 3.4%. It was a very strong quarter as it also put up an impressive beat of analysts’ organic revenue estimates and a solid beat of analysts’ revenue estimates.
The stock is up 7.9% since reporting and currently trades at $25.85.
Read our full, actionable report on Mueller Water Products here, it’s free for active Edge members.
Market Update
As a result of the Fed’s rate hikes in 2022 and 2023, inflation has come down from frothy levels post-pandemic. The general rise in the price of goods and services is trending towards the Fed’s 2% goal as of late, which is good news. The higher rates that fought inflation also didn't slow economic activity enough to catalyze a recession. So far, soft landing. This, combined with recent rate cuts (half a percent in September 2024 and a quarter percent in November 2024) have led to strong stock market performance in 2024. The icing on the cake for 2024 returns was Donald Trump’s victory in the U.S. Presidential Election in early November, sending major indices to all-time highs in the week following the election. Still, debates around the health of the economy and the impact of potential tariffs and corporate tax cuts remain, leaving much uncertainty around 2025.
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