Mueller Water Initiated Buy At Janney, Margins To Expand As U.S. Housing Continues To Recover

Janney Capital recently issued a report highlighting Mueller Water Products, Inc. (NYSE: MWA) after initiating coverage on the manufacturer. Janney rates Mueller Water at Buy with a Fair Value Estimate of $10.

Analysts Michael Gaugler and Katherine Burke wrote, "We consider Mueller Water Products a premier participant in the flow technology industry, given the depth of its product and service offerings, strong market-leading positions, and ability to adapt to changing end market conditions. With its strong balance sheet, prodigious cash flow generation, excellent growth potential, and ability to leverage its product platforms, we believe Mueller Water Products has many advantages over its peers."

Janney noted three key reasons why they believe Mueller's stock may show strength in 2016:

1. U.S. Housing Recovery could drive margin expansion

As residential construction increases, Mueller Water may have greater demand for its products and services, particularly with regards to investment in infrastructure.

2. New Product and Services

By creating the Mueller Technology segment, the business now serves a more diversified customer base which could lead to a decrease in earnings volatility.

3. Balance Sheet Strength

Janney noted that Mueller Water's balance sheet has improved every year since its 2006 IPO. For example, net debt has decreased from $1.1 billion to $370 million and Janney believes that this trend may continue through 2017.