Buy Mueller Water (NYSE:MWA) On the Dip

By Linda McDonough • April 28, 2017 • Profit Catalyst Weekly

 Mueller is down 8% after earnings and a conference call this morning. I believe the weakness is due to weak guidance for its traditional water products.

Despite a hiccup in its basic products, the company is booking big gains in its technology division. Revenue from Mueller Co- the company’s division that sells basic fire hydrants and water apparatus to municipalities was down slightly. Management blamed aggressive buying by distributors in the prior year ahead of a price increase.

Growth in that division will resume as distributors work through this inventory.

Echologics and the Mueller Technology division delivered terrific numbers. Revenue growth for this sector was 21%, up from 14% last quarter. The company announced two new customers for this technology. Backlog for this division grew less than the prior quarter, but management believes bookings will grow dramatically from two new customers it recently added.

Management is very forthright and conservative with estimates. I think the stock is a great buy here as my target is primarily based on the company’s unique leak detection and water diagnostics products.

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Roger Dehring

Roger Dehring

Decided to join you with this trade this morning, Linda,

Went as far out as I could, bought the MWA NOV $10 calls for a -$1.95 debit. Won’t sell any calls against this until MWA recovers a bit.

Thanks,

roger

Diamond Bob

Diamond Bob

Hi, LInda,
Got on the MWA bandwagon also.
I did it a bit different than Roger.
STO nov 12.5 puts
BTO nov 10.0 puts for a credit of 1.20
used that money to buy twice as many nov 12.5 calls @ .70.
Thanks for what I believe will be a great trade. Fingers crossed!
Best to you, Diamond Bob

DanB

DanB

Thanks for posting this trade. Interesting!

Dan

Mark M

Mark M

Hi Linda,
I was wondering if this was a good opportunity to average down a little and scoop up some more shares. You are great at keeping up on everything and keeping the communications current. You answered my question with this report before i could even ask :-). Thanks again for all your hard work.

SP

SP

So what is our strategy for MWA now that its sunk way more than expected…. please advise….

Linda McDonough

Linda McDonough

Hello SP,
Investors were clearly disappointed with Mueller’s quarter last week but I still like the company’s prospects. In addition, smaller stocks have been hit hard in the last 10 trading days. I would put a $9.80 stop on half your position and a $9.25 stop on the balance. I’ll keep you up to date on any new fundamental developments.
Best,
Linda

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