Why Shares in This Water Infrastructure Company Soared This Week | The Motley Fool

Shares in Mueller Water Products (MWA -0.57%) rose 18.1% in the week as of Friday morning. The move comes after an excellent set of first-quarter 2024 earnings released at the start of the week.

Mueller generates 60%-65% of its sales from the municipal water infrastructure market, with 25%-30% from residential construction and 10% from natural gas utilities and industrial applications.

Sales are split roughly 50/50 between the water flow solutions (iron gate valves, specialty valves, and services products) and water management solutions (fire hydrants, metering, leak detection, and pressure-management solutions).

In general, it’s been a good quarter for water infrastructure companies, with Badger Meter (smart meters) reporting stellar results and Xylem’s revenue and earnings beating expectations.

Mueller Water Products’ second quarter

Like the companies noted above, Mueller reported excellent growth in the second quarter. Water flow solutions sales rose a whopping 30.9% year over year, while water management solutions sales decreased 16% compared to the same period last year.

As such, management no longer expects its sales to decline 6% to 2% in 2024 and is now forecasting sales growth in the range of 0%-2% for the full year.

CFO Steven Heinrichs attributed the increase in water flow solutions sales to customers ordering again following a period of inventory destocking last year. The issue of customer destocking dogged many industrial companies last year. Customers ordered ahead as product lead times expanded during the supply chain crisis in 2022. This led to customers holding too much inventory, and as lead times normalized through 2023, they cut back on orders.

Mueller can return to more normal growth patterns with the destocking issue seemingly over, and Wall Street expects mid-single-digit revenue growth for Mueller in its fiscal 2025. These factors are what’s driving the stock higher this week.