Mueller Water Products Inc. (NYSE: MWA)

Mueller Water Products Inc. (MWA) is a manufacturer and marketer of a range of water infrastructure, flow control and piping component system products for use in water distribution networks and treatment facilities. The Company also acts as a distributor, especially in Canada, for products that are manufactured by other companies. The Company’s product portfolio includes engineered valves, fire hydrants, pipe fittings, water meters and ductile iron pipe. The Company operates through three business segments: Mueller Co., U.S. Pipe and Anvil. Mueller Co. manufactures and sells fire hydrants, valves and related products used in residential water and gas systems. U.S. Pipe manufactures and sells ductile iron pipe, restrained joint products, fittings and other products. Anvil manufactures and sells pipe fittings, couplings, pipe hangers, pipe nipples and related products.

The Company was incorporated on September 22, 2005, and is headquartered in Atlanta, Georgia. Mueller Water Products Inc. operates independently of Walter Industries Inc. as of December 14, 2006.

Source: https://trading.scottrade.com/quotesresearch/ScottradeResearch.aspx?symbol=MWA , http://www.muellerwaterproducts.com/ , http://www.reuters.com/finance/stocks/incomeStatement?stmtType=INC&perType=INT&symbol=MWA.N

Financial Summary

The impact of the overall weakness of the U.S. economy on MWA’s end markets continues to affect its operations adversely. Net sales have decreased significantly from fiscal 2008 levels. Its manufacturing operations include significant fixed costs. As shipment volumes decline, these fixed costs represent a relatively higher percentage of total costs to manufacture its products and its profitability is reduced. Reduced profitability consumes the Company’s available capital, weakens its financial position and adversely affects compliance with the financial covenants contained in its credit agreements.

MWA is dependent upon residential and municipal water infrastructure construction activities, which are seasonal due to the impact of cold weather conditions. Net sales and operating results have historically been lowest in the three-month periods ending December 31 and March 31 when the northern United States and all of Canada generally experience weather that significantly restricts construction activity.

A significant portion of the Company’s net sales are directly related to residential construction, municipal water infrastructure and non-residential construction activity in the United States. Various external sources forecast annualized housing starts will drop 35% to 40% in calendar 2009 compared to calendar 2008. MWA expects residential construction to remain at historically low levels for the near term. In addition, it expects municipal water infrastructure spending in the near term to be influenced adversely by the relatively recent events related to (a) higher cost of credit, (b) uncertainties regarding federal economic stimulus activities and (c) the municipalities’ individual fiscal conditions. MWA also expects non-residential construction to continue to decrease as a result of a slowdown in general economic activity.

As a result of the economic downturn, most of MWA’s manufacturing facilities are operating significantly below their optimal capacities. Since the end of fiscal 2008, it has reduced headcount, consolidated facilities, reduced operating days and reduced overall spending activities in response to lower demand for products. During the three months ended June 30, 2009, however, the Company increased production compared to the previous three month period due to a seasonal uptick in demand at Mueller Co. and U.S. Pipe. MWA continually monitors its production activities in response to evolving business conditions and expect to take additional steps to reduce inventories further and best manage its available resources. Restructuring actions at U.S. Pipe’s North Birmingham facility resulted in lower fixed costs, reduced capacity and a $38.5 million non-cash restructuring charge, primarily for impairment of property, plant and equipment, during the nine months ended June 30, 2009.

In addition to reduced demand in water infrastructure markets, MWA also believes its distributors have reduced their inventory levels in response to current economic conditions. The Company does not expect its distributors to maintain higher inventory levels until their confidence in an economic recovery improves.

Net sales for the three months ended June 30, 2009, were $363.2 million compared to $528.5 million in the prior year period. Net sales decreased $176.0 million due to lower shipment volumes and $9.3 million due to unfavorable changes in Canadian currency exchange rates. These declines were partially offset by $20.0 million from price increases.

Gross profit for the three months ended June 30, 2009, was $57.8 million compared to $123.4 million in the prior year period. Lower shipment volumes reduced gross profit by $53.3 million. Gross profit also decreased due to higher per-unit overhead costs on products sold due to lower production of $38.2 million and higher raw material costs of $8.5 million. These decreases were partially offset by higher sales prices of $20.0 million and manufacturing cost saving actions of $11.8 million. Gross margin decreased to 15.9% for the three months ended June 30, 2009, compared to 23.3% in the prior year period. Gross margin decreased primarily due to higher per-unit overhead costs on products sold, especially at Mueller Co. and U.S. Pipe. This decrease was partially offset by a higher proportion of shipments of higher margin products at Mueller Co. and Anvil.

Selling, general and administrative expenses for the three months ended June 30, 2009, and 2008 were $62.4 million and $69.6 million, respectively. Selling, general and administrative expenses declined primarily due to lower shipment volumes and cost saving actions. Selling, general and administrative expenses during the three months ended June 30, 2009, included bad debt expense of $3.9 million related to a specific customer.

During the three months ended June 30, 2009, MWA recorded restructuring charges of $3.9 million related primarily to headcount reductions.

Interest expense, net was $17.2 million during the three months ended June 30, 2009, compared to $17.5 million during the three months ended June 30, 2008.

Source: http://phx.corporate-ir.net/phoenix.zhtml?c=196762&p=irol-presentations

Analyst Consensus

This is the consensus forecast amongst 12 polled investment analysts. Against the Mueller Water Products Inc company.

The 8 analysts offering 12-month price targets for MWA have a median target of 6.63, with a high estimate of 8.00 and a low estimate of 6.00. The median estimate represents a 33.57% increase from the last price of 4.96.

Source: Financial Times.com

Source: http://www.reuters.com/finance/stocks/estimates?symbol=MWA.N

Investment Highlights

Anvil International L.P., a wholly owned subsidiary of  MWA and John Maneely Company have entered into a definitive purchase and sale agreement pursuant to which Anvil will sell certain of the assets of Picoma, its electrical fittings business, to JMC. Under the agreement, JMC will transfer certain of the assets of Seminole Tubular Products, its plumbing fittings business. The financial terms of the agreement were not disclosed. The companies expect the transaction to close in mid-November 2009, subject to customary closing conditions.  Based in Waynesboro, Pennsylvania, Picoma manufactures electrical conduit fittings and couplings. Eighty-five employees are associated with the Picoma business.

MWA announced in September that it is commencing a public offering of 27,500,000 shares of its Series A common stock pursuant to a shelf registration on Form S-3 filed on June 9, 2009, with the Securities and Exchange Commission. The underwriters will have a 30-day option to purchase up to 4,125,000 additional shares of its Series A common stock to cover over-allotments, if any. Mueller intends to use all of the net proceeds from the offering to repay a portion of indebtedness outstanding under its credit agreement. Bank of America, Merrill Lynch, and Goldman, Sachs & Co. will act as joint book-running managers of the equity offering.

MWA will present at Robert W. Baird’s 2009 Industrial Conference. The presentation will provide an overview of Mueller Water Products and its key business drivers and may include updated information from what has previously been disclosed. The presentation will take place Tuesday, November 10, 2009, at 3:40 p.m. CST at the Four Seasons Hotel Chicago.

Source: Scottrade.com, Reuters.com, muellerwaterproducts.com

Technical Analysis

Source: www.stockcharts.com

Moving Average Price Compare

No current signals

Bollinger Bands

MWA is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.

MACD

The MACD for MWA currently indicates a strong bearish signal for two reasons. First, the MACD is below the signal line, a 9-day moving average. Second, the MACD is below the critical level of 0, which implies that the underlying moving averages are trending lower.

Comparative Analysis

Source: Reuter.com, Nasdaq.com

Insider Trading Activity

Net Share Purchase Activity

Report Disclaimer

DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND ON THIS REPORT. We are not registered as a securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission (the “SEC”) or with any state securities regulatory authority.  We are neither licensed nor qualified to provide investment advice.

The information contained in our report should be viewed as commercial advertisement and is not intended to be investment advice.  The report is not provided to any particular individual with a view toward their individual circumstances. The information contained in our report is not an offer to buy or sell securities.  We distribute opinions, comments and information free of charge exclusively to individuals who wish to receive them.

Our newsletter and website have been prepared for informational purposes only and are not intended to be used as a complete source of information on any particular company.  An individual should never invest in the securities of any of the companies profiled based solely on information contained in our report.  Individuals should assume that all information contained in the report about profiled companies is not trustworthy unless verified by their own independent research.

Any individual who chooses to invest in any securities should do so with caution.  Investing in securities is speculative and carries a high degree of risk; you may lose some or all of the money that is invested.  Always research your own investments and consult with a registered investment advisor or licensed stock broker before investing.

Information contained in our report will contain “forward looking statements” as defined under Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934.  Subscribers are cautioned not to place undue reliance upon these forward looking statements.  These forward looking statements are subject to a number of known and unknown risks and uncertainties outside of our control that could cause actual operations or results to differ materially from those anticipated.  Factors that could affect performance include, but are not limited to, those factors that are discussed in each profiled company’s most recent reports or registration statements filed with the SEC.  You should consider these factors in evaluating the forward looking statements included in the report and not place undue reliance upon such statements.

We are committed to providing factual information on the companies that are profiled.  However, we do not provide any assurance as to the accuracy or completeness of the information provided, including information regarding a profiled company’s plans or ability to effect any planned or proposed actions.  We have no first-hand knowledge of any profiled company’s operations and therefore cannot comment on their capabilities, intent, resources, nor experience and we make no attempt to do so.  Statistical information, dollar amounts, and market size data was provided by the subject company and related sources which we believe to be reliable.

To the fullest extent of the law, we will not be liable to any person or entity for the quality, accuracy, completeness, reliability, or timeliness of the information provided in the report, or for any direct, indirect, consequential, incidental, special or punitive damages that may arise out of the use of information we provide to any person or entity (including, but not limited to, lost profits, loss of opportunities, trading losses, and damages that may result from any inaccuracy or incompleteness of this information).

We encourage you to invest carefully and read investment information available at the websites of the SEC at http://www.sec.gov and FINRA at http://www.finra.org.

Popularity: unranked [?]