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How Will Mueller Water Products (MWA) Stock Be Affected By This New Coverage?

NEW YORK (TheStreet) -- Mueller Water Products (MWA) shares had coverage initiated with a "market perform" rating and $9 price target, suggesting a 5.6% increase from its previous closing price of $8.52, by analysts at Northland Securities.

Today the company announced that it will be releasing its third quarter earnings results after the closing bell on August 4.

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Separately, TheStreet Ratings team rates MUELLER WATER PRODUCTS INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate MUELLER WATER PRODUCTS INC (MWA) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • MWA's revenue growth has slightly outpaced the industry average of 6.2%. Since the same quarter one year prior, revenues slightly increased by 1.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • MUELLER WATER PRODUCTS INC has improved earnings per share by 20.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, MUELLER WATER PRODUCTS INC turned its bottom line around by earning $0.22 versus -$0.03 in the prior year. This year, the market expects an improvement in earnings ($0.31 versus $0.22).
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
  • The gross profit margin for MUELLER WATER PRODUCTS INC is currently lower than what is desirable, coming in at 33.32%. Regardless of MWA's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.36% trails the industry average.
  • Currently the debt-to-equity ratio of 1.84 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Regardless of the company's weak debt-to-equity ratio, MWA has managed to keep a strong quick ratio of 1.92, which demonstrates the ability to cover short-term cash needs.
  • You can view the full analysis from the report here: MWA Ratings Report
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