The leaking residential construction market is still taking its toll on Mueller Water Products (NYSE: MWA) (NYSE: MWA-B), though the company seems to be fixing the leaks.

Fiscal 2008 first-quarter results weren't stellar, but they were in line with Mueller's goal of readying itself for the next construction upswing. While the company reported a net loss of $1.6 million, or a penny a share, that includes some $16.2 million in restructuring charges, or $0.08 a share after tax, in connection with the closure of the U.S. Pipe segment's iron operations in New Jersey. That stacks up against $0.15 in profits in the fiscal 2007 first quarter.

As it now stands, this 2006 spin-off from Walter Industries (NYSE: WLT) commands a market valuation of around $1 billion, more than 55% off its 52-week high. But the market seems to like Mueller's progress toward fixing the ship, as shares are up around 7% since last week's announcement.

Mueller is having a tough go, but investors can take heart that the company offers the industry's widest product line and that most of the company's products occupy the No. 1 or No. 2 spot in their respective markets. Additionally, the company has one of the largest existing installed bases of fire hydrants -- approximately 3 million -- which helps Mueller generate recurring revenue streams from the need of replacement components.

Mueller isn't alone in feeling the housing pinch; home improvement gorillas and Mueller product distributors Home Depot (NYSE: HD) and Lowe's (NYSE: LOW) have also taken it on the chin as of late. Despite Mueller's recent struggles, though, the company's strong market position, able management, and our never-ending need for water all make Mueller look like a solid bet to tap for years to come.

A splash of further Foolishness:

Mueller Water and Walter Industries are Motley Fool Hidden Gems recommendations. Readers can now try the market-beating small-cap service free for 30 days.

Fool contributor Sham Gad is managing partner of the Gad Partners Fund. He has no stakes in the companies mentioned. Home Depot is an Inside Value recommendation. The Fool has a disclosure policy.