Please ensure Javascript is enabled for purposes of website accessibility

Why Mueller Water Products Stock Is Down Today

By Lou Whiteman – Nov 9, 2021 at 1:13PM

Key Points

  • Mueller Water Products failed to deliver in its fiscal Q4, despite strong demand for its products.
  • The results led to at least one analyst downgrade.
  • Mueller is a "show-me" story right now.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Fiscal fourth-quarter earnings failed to meet analysts' expectations.

What happened

Mueller Water Products (MWA 1.72%) ended its fiscal 2021 with a whimper, and investors were not pleased. The company's shares were down 12% at midday on Tuesday after its fiscal fourth-quarter results failed to meet expectations.

So what

Mueller, which makes products used in the transmission, distribution, and measurement of water, earned $0.12 per share in the period, which ended Sept. 30, on revenue of $295.6 million. The revenue figure came in about where analysts had expected, but earnings were well short of the $0.19 per share consensus estimate.

A water treatment plant.

Image source: Getty Images.

CEO Scott Hall called the results "a disappointing end to a strong year," noting that the company faced obstacles including "significant raw material and other cost inflation, supply chain disruptions, and labor availability challenges."

The results led to at least one analyst downgrade. On Tuesday morning, Boenning & Scattergood analyst Ryan Connors cut Mueller to neutral from outperform, calling its underperformance "somewhat disconcerting" given that rivals are thriving due to strong demand. Connors noted that Mueller Water has stumbled in the past, and said the stock will likely be more of a "show-me" story heading into 2022.

Now what

Management struck an upbeat tone about the future, forecasting a 4% to 8% net sales increase in its fiscal 2022 based on its current backlog, strong pricing power, and new product initiatives. Mueller believes it can grow adjusted EBITDA at a similar rate, despite expected headwinds including continued inflation, a challenging labor market, and supply chain disruptions.

There's potential here, but as Connors noted, Mueller has given investors reason to question whether it will be able to capitalize on strong demand during a period when infrastructure renewal is in focus.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.