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Hawk’s Nest

Unusual Call Buying in Mueller Water Products (MWA)

by | Jul 15, 2021

Mueller Water (MWA) unusual 1000 November $17.50 calls bought on 7/14 for $0.30 and has 1250 November $15 calls in open interest from unusual buys at $0.55 on 6/24. MWA will report in early August and nearly broke to multi-year highs yesterday before pulling back with the tape, but a strong trend. MWA is a leading manufacturer and marketer of products and services used in the transmission, distribution and measurement of water in North America. Its products and services are used by municipalities and the residential and non-residential construction industries. Infrastructure manufactures valves for water and gas systems, including iron gate, butterfly, tapping, check, knife, plug, automatic control and ball valves, as well as dry-barrel and wet-barrel fire hydrants and a broad line of pipe repair products, such as clamps and couplings used to repair leaks. Infrastructure’s net sales were $885.5 million in 2020. Sales of Infrastructure products are driven principally by spending on water and wastewater infrastructure upgrade, repair and replacement, and by construction of new water and wastewater infrastructure, which is typically associated with construction of new residential communities. Technologies offers residential and commercial water metering, water leak detection and pipe condition assessment products, systems and services. Technologies’ net sales were $78.6 million in 2020. Technologies is comprised of the Mueller Systems and Echologics businesses. Mueller Systems sells water metering systems, products, services and software directly to municipalities and to waterworks distributors. Echologics sells water leak detection and pipe condition assessment products and services primarily to municipalities. MWA has a market cap of $2.29B and trades 12X EBITYDA, 22.1X Earnings, 3.5X Book and 20.65X FCF with a 1.5% dividend yield. MWA revenues are seeing rising 9.4% in 2021 with EBITDA up 10.8%. MWA is seeing raw material inflation weigh on margins but is taking price actions and improving operational efficiencies. Last quarter, MWA raised F2021 guidance for the second consecutive quarter owing to better visibility into demand recovery across end markets coupled with a record backlog exiting F2Q. MWA is an attractively valued small cap that also fits the mold of a nice potential M&A target as building products companies may look to drive synergies as inflationary pressures persist.

This is by no means large options activity but unusual and sneaky, so could be some insider knowledge.