Watts Water Technologies Inc.: Upgrade to OW on data center growth opportunity

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Watts Water Technologies Inc.: Upgrade to OW on data center growth opportunity

ew product

introductions. In addition, over the medium term we anticipate upward estimate revisions as

Price Performance Exchange-NYSEWTS demonstrates sustained organic growth above consensus of ~5% y/y for 2027-28E. A

52 Week range USD 375.89-242.77recovery in residential housing would drive further upside that is not currently baked into our

estimates. Residential exposure comprised ~30% of WTS 2025 revenue.

Data center exposure & outlook: WTS has disclosed that data center revenue comprised 3% of

2025 sales (up from 2% in 2024), with expectations for multiple years of HDD growth in this

customer segment. 1Q26 data center sales more than doubled y/y. We believe WTS has certainty

of demand with its contractor customers facing multi-year backlogs. This helps provide

confidence that new product R&D investments made today will bear fruit in the coming years, in Source: IDC

our view. Based on company commentary, we believe WTS is still early in this process, and we Link to Barclays Live for interactive charting

see potential for the company to sustain above-market growth as new products are rolled out.

We estimate a potential 300bps incremental organic growth contribution for 2026 assuming a North America Environmental Services

doubling of data center revenue. William Grippin, CFA

+1 617 330 5804

Go-to-market strategy & positioning: Management cites data centers as the company's william.grippin@barclays.com

biggest internal initiative. Customers are focused on quality, certainty/timing of delivery, and BCI, US

service, rather than price. WTS product introductions are seeing strong customer demand, such Alec Scheibelhoffer